Financial
ReportFISCAL YEAR 2022

2

MESSAGE FROM THE PRESIDENT

3

FINANCIAL OVERVIEW

13MESSAGE FROM THE CEO OFHARVARD MANAGEMENT COMPANYHARVARD UNIVERSITY  TABLE OF CONTENTS

15

REPORT OF INDEPENDENT AUDITORS

17

CONSOLIDATED FINANCIAL STATEMENTS

21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1

Message from the President

I am pleased to submit Harvard University’s financial
results for fiscal year 2022.
Guided by health and safety protocols, our community
saw the safe return of students, faculty, and staff tocampus last year. Emerging variants and subvariants
were navigated with discipline and prudence, andimproved health conditions allowed us to ease
restrictions and increase our on-campus activities in
the latter half of the spring semester. In May, we held
our usual Commencement for the Class of 2022 and,two days later, welcomed back to campus the Classesof 2020 and 2021 for a long-awaited celebration. The
preponderance of joy and excitement at these eventswas a spectacular affirmation of our community’s
enduring strength and spirit.
Across Harvard, faculty, students, and staff continue
to advance scholarship and teaching on the world’s
most significant challenges. This fall ushers in the
launch of two groundbreaking research entities:
the Salata Institute for Climate and Sustainability
and the Kempner Institute for the Study of Naturaland Artificial Intelligence. Building on the reportand recommendations released in the spring, thePresidential Initiative on Harvard and the Legacy of
Slavery has begun its implementation work supported
by a $100 million commitment by the University,
most of it endowed. We are making further progress
in Allston with the approval for the first phase of the
University’s Enterprise Research Campus (ERC),
which will serve as an inclusive center for invention,
collaboration, and entrepreneurship, as well as withthe creation of additional affordable housing and the
new home of the American Repertory Theater. These
next steps will bring together partners from Greater
Boston and beyond, expanding our community toincrease vibrancy along and around Western Avenue.

HARVARD UNIVERSITY  MESSAGE FROM THE PRESIDENT

As we grow opportunities, we work to ensure thatthose opportunities are within reach for talented
individuals regardless of their circumstances. We are
deeply grateful to our alums and donors—past andpresent—whose contributions are improving accessto Harvard. Their support has enabled us to expand
the Harvard Financial Aid Initiative (HFAI) for lowand middle-income families. Starting with the classof 2026, the cost to attend Harvard College is free
for families with annual incomes below $75,000,
an increase from the $65,000 annual income
threshold in previous years. Making it possible formore people to realize their potential is an act ofoutstanding generosity.
Though we find ourselves in a better publichealth situation today, there remains instability
in the global economy and markets, which willcontinue to influence the University’s financial
resources. Fortunately, prudent planning and soundmanagement have put us in a strong financial position
that, along with the generous support of alums
and friends, enables us to fulfill our mission. It is
impossible to anticipate the challenges the University
will face in the future, but I know our community
is prepared to embrace opportunities that move
Harvard—and the world—forward.

Lawrence S. Bacow
PRESIDENT
October 2022

2

Financial Overview

From the Vice President for Finance and the Treasurer

Harvard’s operations were reinvigorated in fiscal year
2022 with both revenues and expenses exceeding,for the first time, pre-pandemic levels. This occurredamidst steeply rising inflation, changes in how andwhere work is accomplished, volatility in the capital
markets and economic uncertainty—all which
demand vigilance and innovative, future-oriented
shifts in the way the University operates. Over the past
year, rather than returning to “business as usual,”leaders across Harvard have been focused on how we
can incorporate the collective learnings from the past
two and half years with respect to digital pedagogy,
student access, dynamic approaches to work, the useof space and travel, and research aimed at solving theworld’s challenges.
We want to thank Harvard’s faculty and staff forenabling outstanding teaching that benefits ourstudents and ground-breaking research that benefits
the world. We also want to thank all members ofthe Harvard community for carefully managing ourfinancial resources as we strive to steward every dollar
in support of the mission of the University.
Revenues this past year rebounded with an 11%
increase to $5.8 billion, following two years ofsequential declines with fewer students on campus
during the pandemic. The revenue increases thispast year reflect a return of students to campus withresulting increases in tuition, room and board, andother related service revenues, such as parking,rent and health fees. Harvard had more students on
campus this past year than at any point in its history
as the number of entering first-year students returned
to normal levels, and the number of returning
students was boosted by those who took deferrals
during the pandemic.
As the University’s single largest contributor torevenue, 45% of this year’s income arose fromphilanthropy—9% from current use gifts, which havean immediate impact on operations, and 36% from the

HARVARD UNIVERSITY  FINANCIAL OVERVIEW

ongoing support of distributions from the endowment.
We want to thank all the alumni and donors who gaveto the University—past and present—as Harvard’s
excellence in teaching, scholarship, research, andgenerous financial aid is made possible throughphilanthropy. We are deeply appreciative of thisextraordinary support.
Expenses rebounded as well with a 9% increase,although rising less than revenues due tocomparatively high vacancy rates in staffing as well
as sourcing challenges with goods and services.
The difficulty in hiring people and underlying
supply-chain issues were common problems acrossthe country this past year. The combination of thetemporary boost in revenues along with temporarily
suppressed spending drove a significant portion of the$406 million surplus. Peer universities experienced
this same phenomenon.
A surplus at Harvard is a consolidation of theunderlying results of each of the schools and units
within the University. Surpluses, and for that matter,losses, are earned and controlled locally at Harvard,
and it is our schools and units who decide how toallocate any surplus funds either by reinvesting into
their respective missions, or setting aside funds forrainy day reserves or future programmatic expansion.
Harvard is actively investing across the campus—
please see a few examples in priority areas including
education, financial aid, student accessibility,
research, and climate sustainability detailed laterin this report. Building reserves is also wise at thistime as inflation increases our operating and capitalcosts, and recession fears mount. Recessions put
pressure on all sources of revenues and rapidly affectdonations and research grants, as well as the need forincreased financial aid. Remaining adroit and attentive
is essential as history shows that planning ahead,
including building reserves, can help buffer negative
impacts during times of economic adversity.

3The endowment experienced a negative return of
1.8% for the year. This is a very good result given
the significant declines in both the equity and bondmarkets in the past year. We wrote a year ago that
“history teaches that capital markets give and takeaway,” so we remain cautious in our administrationof the endowment as we endeavor to spend as muchas possible from the endowment annually to support
current academic and research activities, while
keeping an eye on the intent of our alumni anddonors to utilize their endowed gifts as an ongoingsource of income, often with specific restrictions, forgenerations of future students. The positive impact ofa 34% return a year ago has been muted by this year’s
market reversals, but Harvard Management Company(HMC) continues to wisely manage the endowment
so that it can best provide steady and increasing
distributions to the University’s budget into the future.
We thank Narv Narvekar and his HMC colleagues fortheir excellent stewardship, and encourage you to readNarv’s letter on page 13 of the annual report.
Amidst these challenges, the University’s overall
financial condition remains very strong with ample
levels of liquidity, comparatively low levels of debt,
and ready access to borrowings as needed. This pastspring, as the window was closing on many years of a
low interest rate environment, we issued $750 millionof both new taxable and tax-exempt long-term debt,
including a Green Bond issuance, reflecting Harvard’s
commitment to climate sustainability. The all-in fixedinterest rate on this spring’s indebtedness is lower
than similar duration US Treasury borrowing rates
are today, and reduces our overall cost of the total debt
portfolio to just below 4%.

HARVARD UNIVERSITY  FINANCIAL OVERVIEW

As we emerge from the pandemic that left our campus
empty for so long, we recognize that—incredibly andadmirably—it did not impede our community fromcarrying on in the fulfillment of the University’s
mission. Instead, the experience has unleashednew energy, new approaches, and new paths to
help chart the roadmap to Harvard’s future. With astrong financial foundation and agile planning, theUniversity is well positioned to manage through both
future opportunities and challenges.

Thomas J. Hollister
VICE PRESIDENT FOR FINANCE

Paul J. Finnegan
TREASURER
October 2022

4

Harvard University’s stewardship of its financial resources is aimed at advancing teaching, learning, andresearch priorities to make a positive impact in the world. This includes expanding access to education
across the globe, supporting students with our strong financial aid program, fulfilling our ongoingdedication to public service, and transforming how problems are understood and addressed throughresearch. The key financial highlights for fiscal year 2022 included in this report demonstrate theUniversity’s continued commitment to advancing these priorities.

FINANCIAL OVERVIEWThe University ended fiscal year 2022 with anoperating surplus of $406 million compared to$283 million in fiscal year 2021. The result marks thefirst time that revenue and expenses have exceeded
pre-pandemic levels. While on-campus activities
and programming revitalized revenue with more
students enrolled than any year prior, expenses wereconstrained by evolving pandemic restrictions, highvacancy rates in staffing, and sourcing challenges forgoods and services.
In fiscal year 2022, total operating revenue increased
11% or $587 million to $5.8 billion. Harvard’s
diversified revenue portfolio relies on three main
sources of revenue: education or tuition, sponsoredresearch, and philanthropy.
Total education revenue comprises 21% of revenue
and includes tuition and board and lodging paymentsfrom both traditional degree seeking students(undergraduate, graduate, and professional), as well
as executive and continuing education learners. In
support of research, our talented faculty are awarded
external grants to further global and research
priorities and this sponsored funding makes up
17% of revenue. Revenue generated each year fromour education program and research endeavors is
not sufficient to fund operations and as such, theUniversity relies on philanthropy to fill in the gap. In
fiscal year 2022, our current and previous donors

HARVARD UNIVERSITY  FINANCIAL OVERVIEWFISCAL YEAR 2022 UNIVERSITY REVENUE SOURCES

Research
17%

FederalSponsored

Non-Federal
Sponsored

Continuing &Executive
Education

Philanthropy
45%

9%

11%
6%

DegreeSeeking
Education

Education
21%

Current
Use Gifts

13%

36%

Net
Endowment
Distribution

8%
7%

Publications
and Royalties

10%Servicesand Other

Other
17%

supported 45% of revenue through their generosityand belief in the broad impact of education andresearch at Harvard.
For Harvard’s many schools and units, revenue
profiles vary widely, with each drawing a different
proportion of its budget from its endowment andother sources.

5

FISCAL YEAR 2022 SOURCES OF OPERATING REVENUE
Endowment income made available for operations/endowment distribution

7%
12%

17%

6%

5%

7%

10%

9%

21%

3%

13%

Gifts for current use

5%

30%
26%

39%

20%

3%

4%

13%

13%

22%

22%
45%

44%

38%

36%

Other
3%
4%

13%

15%

2%

1%
6%

17%

Sponsored support

6%
13%

12%
10%

Education revenue

35%

7%

61%

12%

21%
81%
71%

24%

3%

24%

31%

38%

11%
12%

52%
37%

36%

36%

34%
25%

University

Divinity

Radcliffe

Facultyof Arts &Sciences

DesignLaw

FISCAL YEAR 2022 OPERATING ExPENSES

Supplies &Equipment
Services
Purchased

Salaries &
Wages

5%
13%
41%
12%

Other

PeopIe52%

7%3%Space &
Occupancy

8%11%Interest
Depreciation

Space 18%

Benefits

HARVARD UNIVERSITY  FINANCIAL OVERVIEWEngineering & Medical
AppliedSciences

24%

22%

21%

20%

20%

Kennedy
SchoolDental

Education

Business

PublicHealthThe University’s operating expenses increased by$464 million or 9%, to $5.4 billion for fiscal year 2022.
While spending has rebounded in many areas acrossthe University, overall expense growth lagged revenue
growth due to continued pandemic and externalmarket conditions.
Compensation, or people, expenses (i.e., salaries,
wages and benefits) represented approximately halfof the University’s total operating expenses in fiscal
year 2022. Salaries and wages increased by 6%, or$130 million, to $2.2 billion, resulting from wage
increases offset by higher than average levels of
position vacancies. Employee benefit expense grew at
a muted pace of 1% due to medical costs increasing at
a lower rate than before the pandemic, combined with
reductions in the long-term cost of our post-retirement
health and pension programs.

6

While non-compensation expense began to rebound,responsible cost management and continued
pandemic impacts to programming and purchasing
suppressed this growth, keeping some expenses
below pre-pandemic levels. Costs for space andoccupancy, travel, and supplies and equipment wereequal to or below pre-pandemic levels. COVID-related
expenditures were down from $83 million in fiscal
year 2021 to $53 million in fiscal year 2022.

BALANCE SHEETInvestments and endowment
In fiscal year 2022, the return on investments
was -1.8% and its value (after the net impact of
distributions from the endowment for operations, andthe addition of new gifts to the endowment during theyear) decreased from $53.2 billion at the end of fiscal
year 2021 to $50.9 billion at the end of fiscal year 2022.
More information can be found in the Message fromthe CEO of Harvard Management Company, foundlater in this report.
The University has a policy of maintaining liquidity
outside of the General Investment Account (GIA).
These liquid, short-term investments totaled$2.2 billion at June 30, 2022 compared to $1.5 billion
at June 30, 2021 (see Note 2), well above our minimum
policy requirement.

HARVARD UNIVERSITY  FINANCIAL OVERVIEW

Debt
Bonds and notes payable increased from $5.5 billion atJune 30, 2021 to $6.1 billion at June 30, 2022, driven
by a $750 million bond issuance during the fiscal
year, consisting of $500 million of taxable bonds
and $250 million of tax-exempt Green Bonds. The
tax-exempt borrowing marked the first time theUniversity issued bonds with a Green designation,reflecting the University’s long-standing sustainablebuilding principles in alignment with the Climate
Bond Initiative. The University maintained its AAA
rating by S&P Global Ratings and Aaa by Moody’s
Investor Services.
Fixed assets
The University resumed capital projects that had
been curtailed as a result of the COVID-19 pandemic
however, though supply chain and construction labor
shortages have continued to delay schedules andspending. The University invested $356 million incapital for fiscal 2022 compared to $410 million in
fiscal year 2021. The current challenges facing theconstruction industry are expected to continue into
fiscal year 2023.
Significant progress was made on major projects
including the completion of Swartz Hall, a donor
funded renewal of Harvard Divinity School’s main
campus building which utilized the University’s
Healthier Building Materials Academy to build a new
multifaith space and modernized classrooms to help
facilitate a sense of community as students returnto campus. In addition, the Reginald F. Lewis Law
Center, a newly renovated space, will serve as a living
laboratory for world-class research, learning, andinnovation, opened its doors on Harvard Law School’s
campus in January 2022.

7

SUSTAINABILITY GOALS
The challenge of climate change demands a bold
response and clear action from organizations andindividuals. Harvard is committed to transitioning
away from fossil fuel use by accelerating solutions thatenhance public health and equity, improve building
efficiency, and promote new renewable energy. Our
entire community of students, faculty, and staff are
taking critical action on climate change by advancing
cutting-edge research and translating research into
action on campus.

Fossil Fuel-Free by 2050 and Fossil Fuel-Neutral
by 2026
Harvard was one of the first organizations toannounce in February 2018 a goal to eliminate theuse of all fossil fuels to heat, cool, and power buildings

and vehicles on our campus by 2050 along with ashort-term goal to be fossil fuel-neutral by 2026 asa bridging strategy. The University’s climate action
plan, including its roadmap to achieve the interim2026 goal, uniquely addresses both greenhousegas emissions (GHG) and health impacts from air
pollution caused by fossil fuels.

Endowment Net Zero by 2050
Harvard has pledged to make its endowment net zeroof greenhouse gases by 2050. This commitment wasa first among university endowments and adheres tothe timeline set by the Paris Agreement. In fiscal year
2022, Harvard Management Company’s operations
became carbon neutral.

PHOTO: BRAD FEINKNOPF

The Science and Engineering Complex (SEC)
opened in fall 2020 and is home to the Harvard
John A. Paulson School of Engineering andApplied Sciences (SEAS). The 544,000-squarefoot building is certified Leadership in Energy
and Environmental Design (LEED) Platinum
and is the largest building and first researchlaboratory globally to receive Living Building
Challenge Materials, Equity, and Beauty
Petal certification.

The 2022 Climate Change Solutions Fundawarded $1.3 million in research grants
to Harvard faculty and students who are
advancing solutions to reduce the risks ofclimate change, diminish its impacts on theenvironment, and hasten innovation that will
support cleaner energy and a greener world.

The new groundbreaking Salata Institutefor Climate and Sustainability, launched infall 2022, will advance and catalyze research
programs across all of Harvard’s Schools
and enable comprehensive cross-University
education in climate and the environment.
The institute is made possible by a $200 million
gift to Harvard from Melanie and Jean Salata.

In spring 2022, Harvard issued $250 millionof green bonds to fund sustainable capitalprojects, including the recently constructed
Science and Engineering Complex, renewal of
Adams House, and renovation of the Soldiers
Field Park housing complex.

James H. Stock, the Harold Hitchings
Burbank Professor of Political Economy with
the Faculty of Arts and Sciences and memberof the faculty at Harvard Kennedy School, wasnamed the inaugural Vice Provost for Climate
and Sustainability in fall 2021 to advance
the University’s climate research and its
global impact.

More than 30 percent of Harvard’s bus fleet
is now electric after the University purchased
four 100 percent electric buses and electric
infrastructure to replace four, similarly sizedbio-diesel powered vehicles. The transition toelectric power is expected to lower greenhousegas emissions by more than 220,000 pounds
annually while reducing air and noise pollution.

HARVARD UNIVERSITY  FINANCIAL OVERVIEW

8EDUCATION
In fiscal year 2022, across its 12 schools, Harvard
enrolled 25,110 students from around the globe,
including 7,095 at Harvard College.

Total education revenue
Student income increased $335 million or 38%
to $1.2 billion in fiscal year 2022. Revenue fromtraditional student programs (undergraduate andgraduate) grew by $113 million or 26% as students
returned to campus for the 2021-2022 school
year after taking advantage of prior year deferralpolicies, allowing them to pause their course of
study during the pandemic. Board and lodging
revenue of $200 million grew 187% as students
fully returned to campus for the academic year.
Financial aid applied to student income increased$70 million or 16% to $506 million in fiscal year
2022. Net executive and continuing education totaled$469 million, rebounding $91 million or 24% after
the substantial impact of the COVID-19 pandemic on
the prior two years with program cancellations andenrollment declines.
Undergraduate and graduate programs andfinancial aid
Harvard is committed to cultivating a diverse
community of bright and talented students regardlessof their ability to pay. Thanks to our robust financial
aid program, approximately 55% of Harvard College
students receive need-based scholarships and pay anaverage of $16,100. Additionally, over 20% of these
Harvard College students pay nothing to attend.
Since launching the Harvard Financial Aid Initiativein 2004, the College has awarded over $2.8 billion
in grant aid, and the undergraduate financial aid
budget has nearly tripled from $80 million in 2005
to $225 million in 2022. The average net cost of
attendance for all Harvard College students is $41,148.
Approximately 94% of dollars supporting student
financial aid at Harvard come from institutionalsources, including gifts, the endowment andunrestricted funds. The other 6% comes fromthe federal government aid initiatives and otheroutside sponsors.

HARVARD UNIVERSITY  FINANCIAL OVERVIEW

Expanding accessIn recent years, Harvard College significantly expandedfinancial aid, first, by eliminating the expectation thatstudents contribute from their summer earnings, andin 2022-23 by expecting a ‘$0 parent contribution’from all families making under $75,000. In addition to
the aid described above, Harvard also provides funding
for low-income students to pay for health insurance,
emergency expenses, event fees, and other activities
in order to ensure that students can participate fullyin the Harvard experience. First-year students fromfamilies making under $75,000 also receive a $2,000
start-up grant.
Over the past decade, the University has continuously
worked to extend a Harvard education to audiences
beyond the traditional on-campus undergraduate andgraduate student. In 2021, Harvard Online enrolled
over 7.6 million unique learners worldwide in courses
created by Harvard faculty, and nine of our twelve
schools offer professional education programs for bothindividuals and organizations. These programs reachlearners in every corner of the globe, helping themachieve their personal and professional potential.
In Fall 2021, Harvard and MIT created a new nonprofit
that focuses on closing the learning and opportunity
gap for millions of learners through the developmentof new educational partnerships, digital tools, andlearning strategies. The nonprofit was created using
the proceeds of the sale of the online course provider
edX to 2U, a leader in education technology. The
new nonprofit plans to devote significant resources
to forging partnerships with institutions of higher
education, particularly community colleges andother educational institutions that serve underresourced communities. It also seeks to partner withother nonprofit organizations to tackle longstanding
inequities in education, and with enterprises andgovernments to address workforce reskilling needs,
while advancing learning experience platforms andresearch in all these areas.

9

RESEARCH
Harvard scholars conduct research in almost every
field, seeking to expand human knowledge throughanalysis, innovation, and insight. In 2022, research
was supported by $976 million of sponsored researchfunds. In addition, the University funded $384 million
in University funds, as submitted in the 2021 National
Science Foundation Higher Education and Research
Development (HERD) Survey. Research is carried out
both in the departments of the schools and at morethan 100 research centers, on campus and aroundthe world. Researchers include faculty members,
visiting scholars, post-doctoral fellows, and graduate
and undergraduate students, and they collaborate
with colleagues across the University, at affiliatedinstitutions, and at other research institutions.
During fiscal year 2022, the University saw continued
growth in research funding. In aggregate, revenue
from federal and non-federal sponsored sources
increased by $49 million or 5%. Federal funding,which accounted for approximately 66% of total
sponsored revenue in fiscal year 2022, increased$17 million or 3% to $642 million. The University’s
relationships with corporations, foundations andother non-federal sponsors expanded in fiscal year
2022, resulting in a $32 million or 11% increasein non-federal sponsored revenues, which totaled$334 million. Nonfederal funding continues to be anarea of growth, as researchers diversify their researchfunding support. In addition, Harvard devotes
significant institutional resources to leverage thesefederal and non-federal investments. This funding
is crucial to support the initial development or earlystage research which enables the researchers todevelop an idea to a state in which it can be presented
to sponsors for additional funding, as well as otheruses including seed funding large new initiatives,
subsidizing projects with external funding, andsupporting faculty to venture into new areas ofscientific inquiry.

HARVARD UNIVERSITY  FINANCIAL OVERVIEW

DEPLOYING ARTIFICIAL INTELLIGENCEAGAINST CANCER
Gastroenterologists at Harvard Medical School andBeth Israel Deaconess Medical Center used an AI-based
computer-vision algorithm to backstop physicians looking
at colonoscopy scans and found they lessened the chancea doctor would miss a potentially cancerous polyp by
30 percent. Across the University, researchers, faculty,
and students are working to improve algorithms, boost
computing power, and push the boundaries of what AI cando. The newly launched Kempner Institute for the Studyof Natural and Artificial Intelligence is one Universitywide initiative in this space, bringing together the fields ofneuroscience and AI to enhance our understanding of how
humans think.

NEW APPROACH MAY HELP CLEAR HURDLE
TO LARGE-SCALE QUANTUM COMPUTING
A team of Harvard-led physicists, which includes
collaborators from QuEra Computing, MIT, and the
University of Innsbruck, has developed a new approachfor processing quantum information that shuffles atoms
in mid-computation, allowing for the self-correction oferrors. This approach marks a major step toward the goalof building large-scale machines that leverage the uniquecharacteristics of quantum mechanics to bring about realworld breakthroughs in material science, communication
technologies, finance, and many other fields.

10PHILANTHROPY
Combining gifts for current use and Harvard’s
endowment distribution, philanthropy accounts
for 45% of fiscal year 2022 revenue. Every gift helps
Harvard continue to be a leading force for progressin the world, enabling excellence in our teaching
and research mission, recruiting and retaining
our worldclass faculty, helping students thrive, andproviding greater access through financial aid.

Gifts for current use
In fiscal year 2022, Harvard received current use
gifts from alumni, foundations, and others totaling$505 million, representing approximately 9% of
operating revenues. Support for the University comesfrom donations of all sizes; more than 75% of gifts infiscal year 2022 averaged $155 per donor.
The Harvard endowment
Harvard’s endowment has existed for nearlyfour centuries and belongs to current and future
generations of Harvard students, faculty, andresearchers. The aggregate endowment is madeup of more than 14,000 individual endowmentsthat support nearly every aspect of the University’swork, from student financial aid to neighborhood
programs, from museum and library preservation to
campus activities, from faculty and fellow positions toscientific advancement.
NARKET VALUE OF THE ENDOWNENT AS OF JUNE 30, 2022
In millions of dollars
President’s funds $3,127
Business$5,086

Other
Departs.
$4,561

Donor contributions to the endowment have enabledleading financial aid programs, groundbreaking
discoveries in scientific research, and hundreds ofprofessorships across a wide range of academic fields.
Each year, a portion of the endowment is paid out asan annual distribution to support the University’sannual operations. In any given year, the University
aims to maximize what we can responsibly draw,
while balancing both current and future needs.
Guided by this principle of intergenerational equity,
Harvard’s endowment is carefully managed in order toensure that future generations will enjoy its benefits
just as much as the current one.
Cash gifts to the endowment were $584 million in
fiscal year 2022 compared to $465 million in fiscal
year 2021.

Endowment returns made available for operations
The University’s endowment spending practice has
to balance two competing goals: the need to fundthe operating budget with a stable and predictable
distribution, and the obligation to maintain the longterm value of the endowment. There is a common
misconception that endowments, including Harvard’s,
can be accessed like bank accounts, used for anythingat any time as long as funds are available. In reality,
Harvard’s flexibility in spending from the endowment
is limited by the fact that it is designed to last forever,which is crucial for an institution intended to serve
generations of students and pursue research onquestions that cannot be answered in one lifetime.

Law $2,504
Public Health $2,009

Medical$5,562Engineering & Applied
Sciences $1,848

Faculty ofArts & Sciences$20,390

Kennedy School $1,559
Radcliffe $805
Education $804
Divinity $796
Design $657
Interfaculty initiatives $487
University professorship $416
Dental $267

TOTAL NARKET VALUE $50,878

HARVARD UNIVERSITY  FINANCIAL OVERVIEW

11

Harvard is obligated to preserve the purchasing powerof the endowment by spending only a small fraction ofits value each year. Spending significantly more thanthat over time, for whatever reason, would privilege thepresent over the future in a manner inconsistent withan endowment’s fundamental purpose of maintaining
intergenerational equity. As a general rule, Harvard
targets an annual endowment payout rate of 5.0 to
5.5% of market value. The actual payout rate varies
each year based on endowment returns. For example,

following extraordinary endowment returns in FY21
of 33.6% that served to boost the endowment’s market
value, the payout rate (i.e., the annual distribution asa percent of market value) fell, despite the fact thatthe annual distribution increased. This critical sourceof funding distributed $2.1 billion in the fiscal year
ending June 30, 2022—representing 36% of Harvard’s
total operating revenue—and is the single largest
source of revenue supporting the University.

ENDOWMENT RETURNS MADE AVAILABLE FOR OPERATIONS BY YEAR
35%

$2,200

30%

2,000
1,800

20%

1,600

Endowment Return

15%
10%

1,400

5%

1,200

0%

1,000

-5%

800

-10%

600

-15%

400

-20%

200

-25%
-30%
Payout
Rate

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

4.6%

4.8%

4.6%

6.1%

5.3%

4.7%

5.1%

4.9%

4.6%

4.9%

5.4%

5.3%

5.3%

5.3%

5.2%

4.2%

Endowment Distribution

Endowment Distribution (in millions of dollars)

25%

0Endowment Return

Endowment payout
While the endowment is a critical source of funding,
70% of the annual distribution is directed to specificprograms, departments, or purposes and must be
spent in accordance with the terms set forth by thedonor. Funds without donor restriction are more
flexible in nature and are critical in supporting
structural operating expenses and transformative,
strategic initiatives. In this way, the endowment
bridges the gap between revenue that is brought infrom tuition and research grants, and the criticalcosts associated with the University’s teaching andresearch activities.

ENDOWMENT SPENDING FLEXIBILITY

Capital/Construction (1%)
Faculty & Teaching (2%)
Library & Museums (3%)
Other

Flexible
9%
30%

24%

20%
6%

Professorships

5%

Scholarships &Student Support

Program support
Research

Donor directed

HARVARD UNIVERSITY  FINANCIAL OVERVIEW

12

RI
TAS

Message from the CEO

OCTOBER 2022

Dear Members of the Harvard Community,
For the most recent fiscal year, which ended on June 30, 2022, the return on the Harvard endowment
was -1.8% and the value stood at $50.9 billion. The endowment also distributed more than $2.1 billion
toward the University’s operating budget, which continues to represent more than one-third of annual
operating revenue.
The disparity between fiscal year 2021 (FY21) and fiscal year 2022 (FY22) returns was stark and reinforces
the necessity of focusing on long-term, risk adjusted returns. Among the headwinds we faced this past
year, several market factors weighed negatively on performance.
• By far the most significant impact was the poor performance of global equity markets overthe course of the year. The S&P 500, Nasdaq Composite, Nasdaq Small Cap, and the ACWI —benchmarks for domestic and global equities — declined by 11%, 23%, 27% and 16%, respectively.

In addition, two other less significant factors weighed upon performance:• While our benchmark relative performance with respect to public equities, hedge funds, andprivate equities had been unusually strong over the past four fiscal years, FY22 was not a strong
benchmark relative year. Notably, however, HMC’s five-year benchmark relative performance — a far
more important metric — remains very strong and reinforces the effective turnaround HMC has made.
• A number of institutional investors leaned into the conventional energy sector, througheither equities or commodity futures, adding materially to their total return. HMC did notparticipate in these returns given the University’s commitment to tackling the impacts ofclimate change, supporting sustainable solutions, and achieving our stated net Zero goals.

Notably, the highest risk asset classes — i.e., the private portfolios of venture capital, buyout, and realestate — were the strongest performers. In fact, the more private assets an investor had in its portfolio
in FY22, the stronger their performance. This is somewhat counterintuitive and may indicate that private
managers have not yet marked their portfolios to reflect general market conditions. This phenomenon
does make us cautious about forward-looking returns in private portfolios.
For example, the venture capital portion of HMC’s private equity portfolio returned high single digits
despite the deeply negative performance of relevant public equity indices. On the other hand, some
venture managers have meaningful exposure to public companies, which declined with public markets.
Accordingly, the performance of venture portfolios during FY22 was largely a function of the proportionof public companies held in those portfolios.
We expect that the end of the current calendar year might present meaningful adjustments to thesevaluations, as investment managers audit their portfolios. Under existing accounting conventions forventure portfolios, investment managers generally use the most recent round of financing to markinvestments. This convention may slow the process of moving existing valuations to fair value. This
circumstance is not unique to Harvard — other institutional investors with large private portfolios willalmost certainly face the same dynamic.

OCTOBER
2022
HARVARD
UNIVERSITY  HARVARD MANAGEMENT COMPANY

131

Given this environment, we are particularly pleased that we were able to sell close to $1 billion
of private equity funds in the secondary market during the summer of 2021 — a time of significant
ebullience — avoiding the discounts these funds would likely face today.

Harvard’s Risk Tolerance
Harvard engaged in a years-long analysis of its risk tolerance to balance the desire for continued growthin the endowment with the University’s steady reliance on annual distributions. In November 2021, theCorporation approved a proposal of the Harvard Finance Committee and the HMC Board to moderately
increase the risk level of the portfolio. Noting how expensive the overall market was at the time, HMC
decided to increase the portfolio risk level slowly over a multi-year period to avoid investing heavily
at prevailing valuations. This increase will eventually make our risk level more consistent with that ofvarious peers, although it will still be lower than some.

Net Zero Efforts
HMC is proud to be deeply engaged in the issue of sustainability. We are particularly excited about
two efforts. First, HMC became the first U.S. endowment to make its own operations carbon neutral
for FY22. Working with a third-party vendor, we measured our greenhouse gas emissions, sought
opportunities to reduce future emissions, and secured offsets through carbon dioxide removal (CDR).

Our goal continues to be mitigation of emissions wherever possible. For the emissions we cannot abate,
our guiding principles for CDR are durability, additionality, quality carbon accounting and monitoring,and they may not result in harm to surrounding ecosystems and communities. Second, HMC has beenan active investor in technology-driven climate transition investments. A more detailed report on ourefforts for these important initiatives will be available in the 2023 Climate Report.

Diversity, Equity & Inclusion
For many years, HMC has worked to address the lack of gender and racial diversity in the financial
industry — among our team, our universe of external managers, and portfolio investments.
We last reported on the diversity of our external managers in 2020. Since then, the percentage ofdiverse, active U.S.-based managers has grown. While we are pleased with our efforts to date, there iscertainly more work to be done. HMC continues to actively seek out opportunities to invest with diverse
managers and to maintain a staff that reflects those same principles.

In Closing
The disparity in performance between FY21 and FY22 serves to highlight both the value of the endowment
to Harvard University during times of economic adversity, as well as the need to focus on long-term
returns. We remain confident that the steps we have taken — and those still in process — to construct a
portfolio that serves the University’s long-term interests will allow Harvard to maintain and increase its
critical support of students, faculty, and research for generations to come.
Best regards,

N.P. “Narv” Narvekar
Chief Executive Officer

OCTOBER
2022
HARVARD
UNIVERSITY  HARVARD MANAGEMENT COMPANY

142

Report of Independent Auditors
To the Joint Committee on Inspection of the Governing Boards of Harvard University
OpinionWe have audited the accompanying consolidated financial statements of Harvard University and its
subsidiaries (the “University”), which comprise the consolidated balance sheet as of June 30, 2022, andthe related consolidated statements of changes in net assets with general operating account detail and ofchanges in net assets of the endowment for the year ended June 30, 2022, and of cash flows for the years
ended June 30, 2022 and 2021, including the related notes (collectively referred to as the “consolidated
financial statements”).
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of the University as of June 30, 2022, the changes in its net assets for the year ended
June 30, 2022, and its cash flows for the years ended June 30, 2022 and 2021 in accordance withaccounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica (US GAAS). Our responsibilities under those standards are further described in the Auditors’
Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
required to be independent of the University and to meet our other ethical responsibilities, in accordancewith the relevant ethical requirements relating to our audit. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our audit opinion.
Other Matter
We previously audited the consolidated balance sheet as of June 30, 2021, and the related consolidated
statements of changes in net assets with general operating account detail, of changes in net assets of theendowment and of cash flows for the year then ended (the balance sheet and the statements of changes in
net assets with general operating account detail and of changes in net assets of the endowment are notpresented herein), and in our report dated October 13, 2021, we expressed an unmodified opinion on those
consolidated financial statements. In our opinion, the information set forth in the accompanying
summarized financial information as of June 30, 2021 and for the year then ended is consistent, in allmaterial respects, with the audited consolidated financial statements from which it has been derived.
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America,
and for the design, implementation, and maintenance of internal control relevant to the preparation andfair presentation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there areconditions or events, considered in the aggregate, that raise substantial doubt about the University’s
ability to continue as a going concern for one year after the date the consolidated financial statements areissued.
PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Boston, MA 02210
T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us

HARVARD UNIVERSITY  INDEPENDENT AUDITOR’S REPORT

15

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable assurance is a high level of assurance but is not absoluteassurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will
always detect a material misstatement when it exists. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control. Misstatements are
considered material if there is a substantial likelihood that, individually or in the aggregate, they would
influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with US GAAS, we:
●
●

●

●
●

Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, and design and perform audit procedures responsive to those risks.
Such procedures include examining, on a test basis, evidence regarding the amounts anddisclosures in the consolidated financial statements.
Obtain an understanding of internal control relevant to the University audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the University’s internal control. Accordingly, no such opinion isexpressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of theconsolidated financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,that raise substantial doubt about the University’s ability to continue as a going concern for areasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, theplanned scope and timing of the audit, significant audit findings, and certain internal control-related
matters that we identified during the audit.
Other Information
Management is responsible for the other information included in the annual report. The other information
comprises the Harvard University Financial Report Fiscal Year 2022, but does not include theconsolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated
financial statements does not cover the other information, and we do not express an opinion or any formof assurance thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and consider whether a material inconsistency exists between the other information andthe consolidated financial statements or the other information otherwise appears to be materially
misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of theother information exists, we are required to describe it in our report.

Boston, Massachusetts
October 12, 2022
2

HARVARD UNIVERSITY  INDEPENDENT AUDITOR’S REPORT

16

CONSOLIDATED BALANCE SHEETS
with summarized financial information as of June 30, 2021

June 30
2022

In thousands of dollars
ASSETS:Cash and cash equivalents
Receivables, net (Note 4)
Prepayments and deferred charges
Operating leases — right of use assets (Note 18)
Notes receivable, net (Note 5)
Pledges receivable, net (Note 6)
Fixed assets, net (Note 7)
Interests in trusts held by others (Note 3)
Securities pledged to counterparties, at fair value (Note 3)
Investment portfolio, at fair value (Note 3)
TOTAL ASSETS$LIABILITIES:
Accounts payable
Deferred revenue and other liabilities
Operating lease liabilities (Note 18)
Other liabilities associated with the investment portfolio (Notes 3 and 10)
Liabilities due under split interest agreements (Note 9)
Bonds and notes payable (Note 10)
Accrued retirement obligations (Note 11)
Government loan advances (Note 5)
TOTAL LIABILITIESNET ASSETSTOTAL LIABILITIES AND NET ASSETSNET ASSETS:
General Operating Account (GOA) (Note 8)
Endowment (Note 8)
Split interest agreements (Note 9)
TOTAL NET ASSETS

Without donor
restrictions

With donor
restrictions$ 6,519,858
9,057,969$ 3,148,616
41,819,711
700,540$ 45,668,867$ 15,577,827

283,227
339,792
317,448
677,147
380,8122,592,434
8,442,840
432,896
179,514
59,135,219$ 72,781,329

$

$

$

486,707
1,679,364
689,342718,031
886,017
6,117,203
928,51429,457
11,534,635

2021

224,042
322,482
315,172
689,962
377,596
2,335,958
8,463,008
515,757
290,388
61,141,750$ 74,676,115

488,896
1,716,026
702,872
756,237
1,019,357
5,503,199
1,078,647
35,807
11,301,041

61,246,694

63,375,074$ 72,781,329$ 74,676,115

June 302022$ 9,668,474
50,877,680
700,540$ 61,246,694

2021$ 9,435,991
53,165,753
773,330$ 63,375,074

The accompanying notes are an integral part of the consolidated financial statements.

HARVARD UNIVERSITY  CONSOLIDATED FINANCIAL STATEMENTS

17

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
WITH GENERAL OPERATING ACCOUNT DETAIL
with summarized financial information for the year ended June 30, 2021
In thousands of dollars
OPERATING REVENUE:
Net student income (Notes 2 and 12)

Without Donor
Restrictions$

With Donor
Restrictions

For the year ended
June 302022
2021

1,223,363$ 1,223,363

Sponsored support (Note 13)
Federal government – direct costs
Federal government – indirect costs
Non-federal sponsors – direct costs
Non-federal sponsors – indirect costs
Total sponsored support

460,707
181,439
77,632
23,859743,637

210,670
21,450232,120

460,707
181,439
288,30245,309975,757

442,268
182,750
259,553
42,116926,687

Gifts for current use (Note 14)

140,625

364,111504,736

540,959

Investment income:Endowment returns made available for operations (Note 8)
GOA returns made available for operations
Other investment income
Total investment income

395,456
153,110
14,591
563,157

1,723,399
7,056
1,730,455

2,118,855
153,110
21,6472,293,612

2,039,524
143,788
15,917
2,199,229$$

888,284

Other revenue (Note 15)
Net assets released from restriction

838,323
2,151,569(2,151,569)

838,323
0693,915
0

TOTAL OPERATING REVENUE

5,660,674

175,117

5,835,791

5,249,074

OPERATING EXPENSES:
Salaries and wages
Employee benefits (Note 11)
Services purchased
Depreciation (Note 7)
Space and occupancy
Supplies and equipment
Interest (Note 10)
Scholarships and other student awards (Note 12)
Other expenses (Note 16)
TOTAL OPERATING EXPENSES

2,206,342
583,931732,709428,860
353,786
271,084
187,534
171,312494,575
5,430,133

02,206,342
583,931732,709428,860
353,786
271,084
187,534
171,312494,575
5,430,133

2,076,665
578,126
644,699
410,229
316,916
210,697
183,455
160,744384,825
4,966,356

230,541

175,117405,658

282,718

15,206(259,353)(153,110)
88,930(5,803)87,874
142,745(11,067)(103,810)
25,2130(173,175)

2,504
1,529,850(143,787)(12,362)765
135,488
105,987(162,718)(616)
21,0190
1,476,130

NET OPERATING SURPLUS
NON-OPERATING ACTIVITIES:
Income from GOA investments
GOA realized and change in unrealized (depreciation)/appreciation, net (Note 3)
GOA returns made available for operations
Change in pledge balances (Note 6)
Change in interests in trusts held by others
Gifts for facilities and loan funds (Note 14)
Change in retirement obligations (Note 11)
Other changes
Transfers between GOA and endowment (Note 8)
Transfers between GOA and split interest agreements (Note 9)
Non-operating net assets released from restrictions
TOTAL NON-OPERATING ACTIVITIESGENERAL OPERATING ACCOUNT NET CHANGE DURING THE YEAR
Endowment net change during the year
Split interest agreements net change during the year (Note 9)
NET CHANGE DURING THE YEAR
Net assets, beginning of year
NET ASSETS, END OF YEAR

15,206(259,353)(153,110)
88,930(5,803)87,874
142,745(11,067)(110,323)
76,828(299,074)(68,533)(365,086)(433,619)
16,011,446$ 15,577,827

6,513
25,213(76,828)
125,899

301,016
232,483
1,758,848(1,922,987)(2,288,073)
11,271,373(72,790)(72,790)
175,137(1,694,761)(2,128,380)
13,205,358
47,363,628
63,375,074
50,169,716$ 45,668,867 $ 61,246,694 $ 63,375,074

The accompanying notes are an integral part of the consolidated financial statements.
HARVARD UNIVERSITY  CONSOLIDATED FINANCIAL STATEMENTS

18

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS OF THE ENDOWMENT
with summarized financial information for the year ended June 30, 2021

In thousands of dollars
Investment return (Note 3):
Income from general investments
Realized and change in unrealized (depreciation)/appreciation, net
Total investment return
Endowment returns made available for operations
Net investment return

Without Donor
Restrictions

Gifts for endowment (Note 14)
Transfers between endowment and the GOA (Note 8)
Capitalization of split interest agreements (Note 9)
Change in pledge balances (Note 6)
Change in interests in trusts held by others (Note 8)
Other changes
Net assets released from restrictions
NET CHANGE DURING THE YEAR
Net assets of the endowment, beginning of year
NET ASSETS OF THE ENDOWMENT, END OF YEAR$

24,464(196,758)(172,294)(395,456)(567,750)$

49,443110,323534,207(6,513)18,603
168,095(77,058)(20,302)(46,957)(1,922,987)
43,742,698$ 41,819,711(4,059)46,957(365,086)
9,423,055$ 9,057,969

For the year ended
June 30
2022
2021

With Donor
Restrictions
108,460(878,123)(769,663)(1,723,399)(2,493,062)$

132,924(1,074,881)(941,957)(2,118,855)(3,060,812)

583,650
103,810
18,603
168,095(77,058)(24,361)0(2,288,073)
53,165,753$ 50,877,680$

17,923
12,814,780
12,832,703(2,039,524)
10,793,179

465,019616
16,830(54,262)
87,633(37,642)
0
11,271,373
41,894,380$ 53,165,753

The accompanying notes are an integral part of the consolidated financial statements.

HARVARD UNIVERSITY  CONSOLIDATED FINANCIAL STATEMENTS

19

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the year ended
June 30
In thousands of dollars

2022

2021

$ (2,128,380)$ 13,205,358

428,860(35,865)
1,511,867(22,704)
82,861(101,062)(81,017)
15,069(556,994)
343
23,439(150,133)
12,815410,229(38,512)(14,741,458)(12,928)(88,398)
226,092(111,634)
22,290(527,463)
362
39,033(137,604)
64,737(17,310)(2,276)(256,476)(6,807)(36,662)(13,530)(1,333,962)(59,751)(10,252)
67,217
155,865
135,848(64,727)(1,465,696)(64,584)
48,654
12,714
15,503,537(14,028,307)(699,810)(426,773)
345,431(50,412)55,893(10,843)
17,206,874(15,952,533)
427,855(472,027)
1,204,807(740)(32,278)746,530(97,004)
65,948556,994(6,350)1,233,100

6,377(26,319)(123,330)
89,344
527,463(8,941)
464,594

NET CHANGE IN CASH
Cash, beginning of year
CASH, END OF YEAR

244,569
1,564,303$ 1,808,872

203,705
1,360,598$ 1,564,303

Cash and cash equivalents (per Consolidated Balance Sheets)
Cash and cash equivalents held in investments (Note 3)
TOTAL CASH AND CASH EQUIVALENTS$

283,227
1,525,645$ 1,808,872$

224,042
1,340,261$ 1,564,303

Supplemental disclosure of cash flow information:
Accounts payable related to fixed asset additions
Cash paid for interest

$
$

$
$

CASH FLOWS FROM OPERATING ACTIVITIES:
Change in net assets
Adjustments to reconcile change in net assets to net cash (used in) operating activities:
Depreciation
Amortization of premium and discount related to bonds and notes payable
Realized and change in unrealized depreciation/(appreciation), net
Change in fair value of interest rate exchange agreements
Change in interests in trusts held by others
Change in liabilities due under split interest agreements
Gifts of donated securities
Proceeds from the sales of gifts of unrestricted securities
Gifts for restricted purposes
Cost of issuance of debt
Loss on disposal of assets
Change in accrued retirement obligations
Non-cash operating lease costs
Changes in operating assets and liabilities:
Receivables, net
Prepayments and deferred charges
Pledges receivable, net
Accounts payable
Deferred revenue and other liabilities
Operating lease liability
NET CASH (USED IN) OPERATING ACTIVITIESCASH FLOWS FROM INVESTING ACTIVITIES:
Loans made to students, faculty, and staff
Payments received on student, faculty, and staff loans
Change in other notes receivable
Proceeds from the sales and maturities of investments
Purchase of investments
Change associated with repurchase agreements
Additions to fixed assets
NET CASH PROVIDED BY INVESTING ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIES:
Change in overdrafts included in accounts payable
Change in split interest agreements from new contributions, income and payments to annuitants
Proceeds from issuance of debt
Debt repayments
Proceeds from the sales of gifts of restricted securities
Gifts for restricted purposes
Change in government loan advances
NET CASH PROVIDED BY FINANCING ACTIVITIES

45,583
222,932

40,225
223,715

The accompanying notes are an integral part of the consolidated financial statements.

HARVARD UNIVERSITY  CONSOLIDATED FINANCIAL STATEMENTS

20

1. UNIVERSITY ORGANIzATION
Harvard University (the “University”) is a private, not-forprofit institution of higher education with approximately
7,100 undergraduate and 14,100 graduate students infiscal year 2022, as compared to 5,200 undergraduate and13,400 graduate students in fiscal year 2021. Establishedin 1636, the University includes the Faculty of Arts andSciences, the John A. Paulson School of Engineering andApplied Sciences, the Division of Continuing Education, ten
graduate and professional Schools, the Radcliffe Institutefor Advanced Study, a variety of research museums andinstitutes, and an extensive library system to support theteaching and research activities of the Harvard community.

The President and Fellows of Harvard College (the“Corporation”), a governing board of the University, hasoversight responsibility for all of the University’s financial
affairs. The Corporation delegates substantial authority to
the Schools and departments for the management of theirresources and operations.
The University includes Harvard Management Company(HMC), a wholly owned subsidiary founded in 1974 to
manage the University’s investment assets. HMC isgoverned by a Board of Directors that is appointed by
the Corporation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of presentation
The accompanying consolidated financial statements
have been prepared on the accrual basis of accounting
and include the accounts of the University and affiliatedorganizations controlled by the University. Significant interaffiliate accounts and transactions have been eliminated.
Funds transferred to the University on behalf of specificbeneficiaries (agency funds) are recorded as assets andliabilities in the Consolidated Balance Sheets and are notincluded in the Consolidated Statements of Changes in
Net Assets with General Operating Account Detail.
The consolidated financial statements include certain prioryear summarized comparative information in total, not by
net asset classification. This information is not presented in
sufficient detail to conform to generally accepted accounting
principles (GAAP). Accordingly, such information should
be read in conjunction with the University’s financial
statements for the year ended June 30, 2021, from which
the summarized information is derived. Certain prioryear amounts have been reclassified to conform to current
year presentation.

Net asset classifications
For the purposes of financial reporting, the University
classifies resources into two net asset categories pursuant
to any donor-imposed restrictions and applicable law.
Accordingly, the net assets of the University are classified in
the accompanying consolidated financial statements in the
categories that follow:
WITHOUT DONOR RESTRICTIONS — Net assets not subject todonor-imposed restrictions. Funds invested in fixed assets
and unrestricted endowment funds comprise 81% of the

University’s net assets without donor-imposed restrictions
as of June 30, 2022. In addition, this category includes
gifts and endowment income balances where the donor
restriction has been met, University-designated loan funds,
and other current funds.
WITH DONOR RESTRICTIONS —Net assets subject to legal
or donor-imposed restrictions that will be satisfied
either by actions of the University, the passage of time,or both. These net assets include net assets subject todonor-imposed restrictions that are invested to provide aperpetual source of income to the University. Generally,
donors of these assets require the University to maintainand invest the original contribution in perpetuity but
permit the use of some or all investment returns for generalor specific purposes. The appreciation on these perpetual
contributions must be reported as net assets with donor
restrictions until appropriated for spending in accordancewith Massachusetts law. Also included in this category
are gifts donated for a particular purpose and amounts
subject to time restrictions such as funds pledged for
future payment.
Revenues from sources other than contributions are
generally reported as increases in net assets without
donor restrictions. Expenses are reported as decreases in
net assets without donor restrictions. Gains and losses
on investments are reported as increases or decreases in
net assets without donor restrictions, unless their use
is restricted by donor stipulations or by law. Investment
returns earned by restricted donor funds are initiallyclassified as net assets with donor restrictions and thenreclassified to net assets without donor restrictions when
expenses are appropriated or incurred for their intended
purpose. Expirations of donor restrictions on net assets

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21

are reported as reclassifications from net assets withdonor restrictions to net assets without donor restrictions
and appear as “Net assets released from restrictions” and“Non-operating net assets released from restrictions” in theConsolidated Statements of Changes in Net Assets.

Liquidity and availability
As part of the University’s liquidity management, it hasa policy to structure its financial assets to be available asits general expenditures, liabilities and other obligations
come due. A significant portion of the University’s annual

expenditures are funded by operating revenues in thecurrent year including student income, sponsored support,
endowment returns made available for operations, gifts for
current use and other revenues.
The University’s financial assets available within one yearof the balance sheet date for general expenditure, such as
operating expenses, scheduled principal payments on debt,
and capital construction costs not financed with debt, are as
follows (in thousands):

June 30,
2022
FINANCIAL ASSETS
Cash and cash equivalents
Receivables, net
Pledge receivables due in one year
Cash equivalents and short-term investments held separately by General Operating Account (GOA)1
Endowment returns made available for operations in the following year
TOTAL FINANCIAL ASSETS AVAILABLE WITHIN ONE YEAR
LIQUIDITY RESOURCES
Credit facility, undrawn balanceTax-exempt commercial paper, undrawn balanceTaxable commercial paper, undrawn balance
TOTAL FINANCIAL ASSETS AND RESOURCES AVAILABLE WITHIN ONE YEAR$

283,227
339,792
376,097
2,236,157
2,460,1422021$

224,042
322,482
347,284
1,539,736
2,308,724$ 5,695,415$ 4,742,268

1,500,000
1,000,000
2,000,000

1,500,000
1,000,000
2,000,000$ 10,195,415$ 9,242,268

1 The University has a policy of maintaining liquidity outside of the General Investment Accounting (GIA) through a combination of cash equivalents andshort‑term investments, as referenced on page 7 in the Financial Overview.

Endowment and GOA returns liquidated from investments
and made available for operations over the course of the
fiscal year are distributed to University department andprogram budgets to spend, subject to donor restrictions
where applicable.
While the University has no intention of doing so, there
are additional investments held by the University and theendowment that could be liquidated in the event of an
unexpected disruption. While a portion of the endowment
is subject to donor restrictions, there is $9.1 billion and$9.4 billion in endowment funds without donor restrictions
at June 30, 2022 and 2021, respectively and $4.7 billion
and $4.8 billion of General Operating Account investments(GOA) at June 30, 2022 and 2021, respectively, that could beaccessed with the approval of the Corporation and subject tothe redemption provisions described in Note 3.

Revenue recognition
Revenue is recognized when control of promised goods
or services is transferred to customers, in an amount thatreflects the consideration the University expects to beentitled to in exchange for those goods or services.

Student income is derived from degree programs as well
as executive and continuing education programs andincludes tuition, fees, and board and lodging. Student
income is recognized ratably over the academic period of
the course or program offered based on time elapsed, andscholarships awarded to students reduce the amount ofrevenue recognized. The University’s individual schools
have various billing and academic cycles and the majority ofour programs are completed within the fiscal year. Student
income received in advance of services to be rendered isrecorded as deferred revenue which totaled $209.1 million
and $226.0 million, respectively, at June 30, 2022 and 2021,
which are primarily recognized in the subsequent fiscal year.
Total student income of $1.2 billion and $888.3 million
was recorded during the years ended June 30, 2022 and
2021, respectively. Student tuition, fees, board and lodging
at published rates is summarized as follows for the years
ended June 30, 2022 and 2021 (in thousands of dollars):
Undergraduate program
Graduate and professional degree programsContinuing education and executive programs
Board and lodging

2022$ 390,809
652,005
486,682
199,7712021$ 278,412
581,259
395,076
69,496

Scholarships applied to student charges were $505,904 and $435,959 for theyears ended June 20, 2022 and 2021, respectively.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22

Unconditional contributions including pledges arerecognized immediately and classified as either net
assets with donor restrictions or net assets without
donor restrictions. Conditional contributions for whichcash is received are accounted for as a liability withindeferred revenue.
Sponsored support of $975.8 million includes support
from governmental and private sources. Certain sponsoredarrangements are considered exchange arrangements,
and revenue under these agreements is recognized basedon the University’s fulfillment of the contract, which
is typically based on costs incurred or the achievementof milestones. Other sponsored support is considered
contribution revenue, which is recognized when any
donor-imposed conditions have been met, if applicable.
Sponsored conditional contributions received, where thebarrier to entitlement is not yet overcome, are recorded
as deferred revenues of $61.1 million and $68.2 million
as of June 30, 2022 and 2021, respectively. As of June 30,
2022, the University also had $1.5 billion awarded but not
yet expended contributions related to sponsored programs
where the condition had not yet been met. This is subject
to federal appropriations. Funding received in advance ofrecognition is recorded as deferred revenue.
Other revenue of $838.3 million in fiscal 2022
and $693.9 million in fiscal 2021 includes several
revenue streams considered exchange contracts withcustomers totaling $728.1 million for fiscal year 2022
and $605.3 million in fiscal 2021. These revenues arerecognized at the point in time goods or services areprovided. Deferred revenues related to other revenue of$104.7 million and $102.1 million were recorded as ofJune 30, 2022 and 2021, which are primarily recognizedin the subsequent fiscal year.

Measure of operations
Revenues earned, expenses incurred, and returns madeavailable for operations for the purpose of teaching,conducting research, and the other programs and servicesof the University are the components of “Net operating
surplus” in the Consolidated Statements of Changes in
Net Assets with General Operating Account Detail. The
University’s non-operating activity within the Consolidated
Statements of Changes in Net Assets with General Operating
Account Detail includes contributions to the University’sbuilding construction and renovation funds, investment
returns (net of amounts made available for operations),change in pledge balances, long-term benefit plan obligation
funding changes, and other infrequent transactions.

Collections
The University’s vast array of museums and libraries
contains priceless works of art, historical treasures, literaryworks, and artifacts. These collections are protected andpreserved for public exhibition, education, research, andthe furtherance of public service. They are neither disposedof for financial gain nor encumbered in any manner.
Accordingly, such collections are not recorded for financial
statement purposes. Proceeds on deaccessioned collections
are used to fund new collections or the direct care ofexisting collections. Direct care is defined as general carefor the preservation of a collection.

Insurance programs
The University, together with the Harvard-affiliatedteaching hospitals, has formed a captive insurancecompany, Controlled Risk Insurance Company (CRICO), toprovide limited professional liability, general liability, andmedical malpractice insurance for its shareholders. The
University self-insures a portion of its professional liability
and general liability programs and maintains a reserve forincurred claims, including those related to Harvard Medical
School activities not occurring in the affiliated teaching
hospitals. CRICO provided malpractice coverage applies
with no deductible for medical professionals practicing
within Harvard’s University Health Services department,
the School of Dental Medicine, and the T.H. Chan Schoolof Public Health. The University also maintains reserves
for the self-insured portion of claims related to automobile
liability, property damage, and workers’ compensation;these programs are supplemented with commercial excess
insurance above the University’s self-insured retention. In
addition, the University is self-insured for unemployment,
the primary retiree health plan, and all health and dental
plans for active employees. The University’s claims
liabilities are recognized as incurred, including claims thathave been incurred but not reported, and are included inoperating expenses.

Tax
The University is a tax-exempt organization under
Section 501(c)(3) of the Internal Revenue Code.
On December 22, 2017, the Tax Cuts and Jobs Act (the“Act”) was enacted. The Act impacts the University inseveral ways, including the addition of excise taxes on
executive compensation and net investment income, as
well as new rules for calculating unrelated business taxable
income. The University records an estimate for related tax
expense based on currently available regulatory guidance of
the Act and continues to evaluate the impact of the Act on
current and future tax positions.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23

Use of estimates
The preparation of financial statements in accordance with
U.S. GAAP requires management to make estimates andassumptions that affect reported amounts and disclosures.
Actual results could differ from those estimates.

New accounting pronouncements
Effective July 1, 2021, the University adopted ASU
2018-15, Intangibles — Goodwill and Other — InternalUse Software (Subtopic 350-40): Customer’s Accounting
for Implementation Costs Incurred in a Cloud Computing
Arrangement That is a Service Contract. This guidancealigns the requirements for capitalizing implementation
costs incurred in a hosting arrangement that is aservice contract with the requirements for capitalizing
implementation costs incurred to develop or obtain
internal-use software or software licenses. The University
adopted ASU 2018-15 prospectively. This guidance did nothave a significant impact on the University’s consolidated
financial statements.
Effective July 1, 2021, the University adopted ASU 2020-07,
Presentation and Disclosures by Not-for-Profit Entities forContributed Nonfinancial Assets. This guidance is intended
to increase transparency on how contributed nonfinancial
assets are to be used and valued. The University adopted

ASU 2020-07 prospectively. This guidance did not havea significant impact on the University’s consolidated
financial statements.
Effective July 1, 2021, the University adopted ASU
2018-14, Disclosure Framework — Changes to the Disclosure
Requirements for Defined Benefit Plans, which amends
ASC 715, Compensation — Retirement Benefits. Thisaccounting pronouncement modifies the disclosure
requirements for employers that sponsor defined benefit
pension or other postretirement plans. The University
adopted ASU 2018-14 on a retrospective basis. The effects
of adopting this amendment are addressed in Note 11.
Effective July 1, 2020, the University adopted ASU 2019-03,
Not-for-Profit Entities (Topic 958): Updating the Definitionof Collections. The accounting pronouncements updates
the definition of “collections” to align with the definition
used by the American Alliance of Museums. The change
in the definition requires proceeds from sales of collections
to be used for acquisition of additional collections ordirect care of existing collections. The University adopted
ASU 2019-03 prospectively. The guidance did not havea significant impact on the University’s consolidated
financial statements.

3. INVESTMENTS
Investments are presented at fair value in accordance withGAAP and under the guidelines prescribed by the HMC
investment valuation policy, which is reviewed and approvedby the HMC Board of Directors on an annual basis.

The majority of the University’s investments are managed
by HMC in the GIA, a pooled investment account thatconsists primarily of endowment assets. Certain otherinvestments such as cash, short-term investments, split
interest agreements and other assets, are managed
separately from the GIA.

The University’s investment holdings as of June 30, 2022 and 2021 presented on the Consolidated Balance Sheets are
summarized in the following table (in thousands of dollars):
2022

2021

Investment portfolio assets
Pooled general investment account assets
Other investments
Investment portfolio, at fair value
Securities pledged to counterparties, at fair value
TOTAL INVESTMENT ASSETS$ 55,938,831
3,196,388
59,135,219
179,51459,314,733$ 58,566,261
2,575,489
61,141,750
290,388
61,432,138

Pooled general investment account liabilities
Interest rate exchange agreement
TOTAL OTHER LIABILITIES ASSOCIATED WITH THE INVESTMENT PORTFOLIOTOTAL INVESTMENTS, NET

709,4228,609
718,031$ 58,596,702

724,924
31,313756,237$ 60,675,901

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS24

As of June 30, 2022 and 2021, University net investments were comprised of the following components (in thousandsof dollars):
POOLED GENERAL INVESTMENT ACCOUNT
Endowment1
General operating account
Split interest agreements
Other internally designated funds
TOTAL POOLED GENERAL INVESTMENT ACCOUNT NET ASSETSOTHER INVESTMENTS OUTSIDE THE GENERAL INVESTMENT ACCOUNT
General operating and other investments2
Split interest agreements
TOTAL OTHER INVESTMENTS OUTSIDE THE GENERAL INVESTMENT ACCOUNTTOTAL INVESTMENTS, NET

2022

2021

$ 48,798,038
4,658,269
934,971
1,017,645$ 55,408,923$ 51,279,803
4,777,430
1,021,209
1,053,283$ 58,131,725

2,536,192
651,587$ 3,187,779$ 58,596,702

1,772,698
771,478$ 2,544,176$ 60,675,901

1 As of June 30, 2022, the total net assets of the endowment of $50,877,680 is comprised of investments in the GIA of $48,798,038, pledges of $1,433,186,

interests in trusts held by others of $403,626, and $242,830 of other non‑GIA investments and GIA interest and dividends net of all internal and externalmanagement fees and expenses. See Note 8 for further composition of the net assets of the endowment.

2 Consists primarily of repurchase agreements, US government securities, money markets, and fixed income funds, totaling $2,238,277 and $1,563,715 as ofJune 30, 2022 and 2021, respectively.

Investment return
A summary of the University’s total return on investments for fiscal years 2022 and 2021 is presented below (in thousandsof dollars):
Return on pooled general investment account:
Realized and change in unrealized (depreciation)/appreciation, net
Interest, dividend, fees, and expenses, net
Total return on pooled general investment account1
Return on other investments:
Realized and change in unrealized depreciation/(appreciation), net
Interest, dividend, fees, and expenses, net
Total return on other investments
Realized and change in unrealized appreciation on interest rate exchange agreement, net
TOTAL RETURN ON INVESTMENTS 2

2022

2021

$ (1,223,200)
150,734(1,072,466)$ 14,522,886
20,216
14,543,102(288,667)
36,225$ (252,442)
19,169$ (1,305,739)

218,572
26,093$244,665
9,272$ 14,797,039

1 Net of all internal and external management fees and expenses.
2 Total return on investments is comprised of returns on the endowment, GOA, Split Interest Agreements and other.

Fair value hierarchy
The University’s investments have been categorized based
upon the fair value hierarchy in accordance with ASC 820,
which prioritizes the inputs to valuation techniques used tomeasure fair value of investment assets and liabilities into
three levels:
LEVEL 1 Unadjusted quoted prices in active markets thatare accessible at the measurement date for identical,
unrestricted assets or liabilities;
LEVEL 2 Quoted prices in markets that are not considered tobe active or financial instruments for which all significant
inputs are observable, either directly or indirectly;

LEVEL 3 Prices or valuations that require inputs
that are significant to the fair value measurement,
unobservable and/or require the University to develop its
own assumptions.
Investments in externally managed funds where theUniversity utilizes net asset values (as reported byexternal managers) as a practical expedient for fair value
measurements are excluded from the fair value hierarchy.
The level of an asset or liability within the fair value
hierarchy is based on the lowest level of any input that issignificant to the fair value measurement. The University
endeavors to utilize all relevant and available information inmeasuring fair value.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25

The following is a summary of the levels within the fair value hierarchy for those investment assets and liabilities subject tofair value measurement as of June 30, 2022 and summarized as of June 30, 2021 (in thousands of dollars):
2022

Level 1ASSETS:Cash and cash equivalents1
Repurchase agreements
Domestic equity
Foreign equity
Global equity
Domestic fixed income
Foreign fixed income
Emerging market equity and debt
High yield
Hedge funds
Private equity
Natural resources
Real estate
Inflation-indexed bonds
Due from brokers
Other investments
INVESTMENT ASSETS SUBJECT TO
FAIR VALUE LEVELING
Other investment assets not subject to fair value2
TOTAL INVESTMENT ASSETS 3
Interests in trusts held by others4

Level 2

$ 1,525,645$

749,873

1,401,469
240,005
1,711,458
17,47915,371
2,787

INVESTMENT LIABILITIES SUBJECTTO FAIR VALUE LEVELING
Other investment liabilities not subject tofair value
TOTAL INVESTMENT LIABILITIES 3
Liabilities due under split interest agreements4
NON-INVESTMENT LIABILITIES SUBJECTTO FAIR VALUE LEVELINGTOTAL LIABILITIES$ 1,683,807
1,831,265
1,262,693
1,065,873

10,0183,337,355$ 298,319
1,174,625

3,506
25,074
1,097,023
14,583$ 6,029,326

$

2,963
65,2084,640

828,062$ 1,502,658

432,896

NON-INVESTMENT ASSETS SUBJECTTO FAIR VALUE LEVELINGTOTAL ASSETSLIABILITIES:Due to brokers5
Other liabilities subject to fair value

Level 32021
NAV asPractical
Expedient$ 432,896$

77,081

16,774,488
20,766,298
427,623
3,252,246$ 50,401,648

Total

Total

$ 1,525,645
749,873
3,085,276
2,071,270
1,262,693
2,787,349
17,4793,352,726
301,106
16,774,488
21,940,923
431,129
3,277,320
1,097,023
22,186
65,208$ 1,340,261
50,063
4,311,314
2,154,920
2,351,562
2,399,417
1,920
4,562,151
275,622
18,030,872
20,688,062
464,278
2,907,096
1,156,229
13,91135,532$ 58,761,694
553,039$ 59,314,733
432,896$ 60,743,210
688,928$ 61,432,138
515,757$ 432,896$ 59,747,629$ 515,757$ 61,947,895$

77,081
154,949$

131,941
148,728$

232,030$

280,669$

486,001
718,031
886,017$475,568
756,237
1,019,357$ 154,949$

77,081$

886,017$886,017$ 154,949$ 886,017$ 1,604,048$ 1,019,357$ 1,775,594

1 This amount includes cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents as presented in the Consolidated

Statements of Cash Flows. This excludes money markets held in “Cash and cash equivalents” on the Consolidated Balance Sheets of $65.0 million as ofJune 30, 2022 and 2021, respectively, which are Level 1 investments.
2 As of June 30, 2022 and 2021 other assets not subject to fair value consist primarily of receivables for transactions that settled subsequent to the balance sheet
date of $480,949 and $612,801, respectively .
3 As of June 30, 2022 and 2021, total investment assets, net equal $58,596,702 and $60,675,901, respectively.
4 Amounts excluded from investments and included separately on the University’s Consolidated Balance Sheets.
5 Includes fair value of an interest rate exchange agreement on the University’s debt portfolio of $8,609 and $31,313 as of June 30, 2022 and 2021, respectively.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

26

The following is a rollforward of Level 3 investments for the year ended June 30, 2022 and the summarized June 30, 2021
rollforward of Level 3 investments (in thousands of dollars).
Beginningbalance as ofJuly 1, 2021
INVESTMENT ASSETS:
High yield
Private equity
Real estate
Due from brokers
INVESTMENT ASSETSSUBJECT TO FAIR VALUELEVELING
Interests in trusts held by others
NON-INVESTMENT ASSETSSUBJECT TO FAIR VALUELEVELING$

Net changeNetrealized in unrealized
gains/ appreciation/
Purchases/
Sales/(losses) (depreciation)1 contributions distributions

273,571 $ 1,009
1,891,116 17,613
23,8594,625(2,137)
81,577115
15$ 290,539
304,947
1,100$$ 2,193,171 $ 18,622
515,757$ 79,570(81,754)$ 596,586$ (1,241,829)(1,107)$$ (81,754)

515,757$$

Transfers
into Level 3(264,663)(977,166)

Transfers
Endingout of balance as ofLevel 32 June 30, 2022$
$ (143,462)$ (143,462)(1,107)298,319
1,174,625
25,0744,640$ 1,502,658$ 432,896$

432,896

TOTAL ASSETS SUBJECTTO FAIR VALUE LEVELING$ 2,708,928 $ 18,622$(2,184)$ 596,586

INVESTMENT LIABILITIES:Other liabilities subject to fair value$

148,728$(1,098)$(34,550) $41,869$154,949

TOTAL LIABILITIES SUBJECTTO FAIR VALUE LEVELING$

148,728 $0$(1,098)$(34,550) $41,869$154,949

NET ASSETS SUBJECT TO
FAIR VALUE LEVELING$ 2,560,200 $ 18,622$(1,086)$ 631,136$ (1,242,936)$ (143,462)$ (1,284,805)$ (143,462)$ 1,935,554$ 1,780,605

1 Total change in unrealized appreciation/(depreciation) relating to Level 3 investment assets and investment liabilities still held by the University at June 30,

2022 is $95,568 and is reflected in “Realized and change in unrealized (depreciation)/appreciation, net” in the Consolidated Statements of Changes in
Net Assets.
2 The transfers out of Level 3 represent interests in private companies that underwent an initial public offering during the fiscal year.

Beginningbalance as ofJuly 1, 2020
PRIOR YEAR NET ASSETS SUBJECTTO FAIR VALUE LEVELINGNet changeNetrealized in unrealized
gains/ appreciation/
Purchases/
Sales/(losses) (depreciation)1 contributions distributions$ 2,251,138 $ (4,142)$ 163,716$ 652,052$(761,969)

Transfers
into Level 3$ 740,943

EndingTransfers
out of balance as ofLevel 3 June 30, 2021
$ (481,538)$ 2,560,200

1 Total change in unrealized appreciation/(depreciation) relating to Level 3 investment assets and investment liabilities still held by the University at June 30,

2021 is $206,133 and is reflected in “Realized and change in unrealized (depreciation)/appreciation, net” in the Consolidated Statements of Changes in
Net Assets.

Investment strategy and risk
The University utilizes a number of wholly owned
subsidiary entities to support its investment activities.
The consolidated financial statements include all assets,
liabilities, income, and expenses associated with these
entities and intercompany accounts and transactions havebeen eliminated during consolidation.
The University’s investment strategy incorporates adiversified asset allocation approach and maintains,
within defined limits, exposure to the movements of the
global public and private equity, fixed income, real estate,
and commodities markets. Exposure to these markets
is achieved through direct investments in individual
securities, investments in special purpose vehicles
and/or through investments in vehicles advised byexternal managers.

Investments in global markets involve a multitude ofrisks such as price, interest rate, market, sovereign,
currency, liquidity and credit risks, amongst manyothers. The University manages exposure to these risks
through established policies and procedures related toits ongoing investment diligence and operational due
diligence programs. The University also considers manager
concentration risk. As of June 30, 2022, 16% of the GIA
NAV was invested across 5 diversified fund managers. The
University anticipates that the value and composition of its
investments may, from time to time, fluctuate substantiallyin response to any or all of the risks described herein.

Cash and cash equivalents
Cash and cash equivalents are recorded at cost, whichapproximates fair value, and includes cash in bank accounts,
institutional money market funds and other temporary

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

27

investments held for working capital purposes withoriginal maturities of three months or less. Cash and cash
equivalents do not include cash balances held as collateralby the University. Cash and cash equivalents designatedfor investment purposes are included in the “Investment
portfolio, at fair value” in the Consolidated Balance Sheets.

Repurchase agreements
The University Consolidated Balance Sheets display theassets generated by repurchase transactions. The University
enters into these transactions under agreements containing
master netting arrangements. The University requires
the fair value of the collateral exchanged under these
agreements to be equal to or in excess of the total amountof the agreement, including interest where applicable. At
June 30, 2022 and 2021 the University had gross asset
repurchase agreements of $0.8 billion and $0.1 billion
which were fully collateralized. The University does notoffset repurchase agreements that are subject to masternetting arrangements or similar arrangements on the
University’s Consolidated Balance Sheets.

Dividend and interest income
Dividend income is recognized net of applicable
withholding taxes on the ex-dividend date. Non-cash
dividends are recorded at the fair value of the securities
received. Interest income and expense is recorded net of
applicable withholding taxes, on an accrual basis. The
University amortizes bond premiums and accretes bonddiscounts using the effective yield method and when cash
collection is expected.

Traded securities
Instruments listed or traded on a securities exchange arevalued at the last quoted price on the primary exchange
where the security is traded. Where there is no readily
available closing price on the valuation date, long positions
are valued at the bid price and short positions are valued at
the ask price. Restrictions that are attached to a security arefactored into the valuation of that security, reflective of theestimated impact of those restrictions. Investments in nonexchange traded debt and equity instruments are primarily
valued using inputs provided by independent pricing
services or by broker/dealers who actively make markets inthese securities.

Derivatives
The University uses a variety of financial instrumentswith off-balance sheet risk involving contractual or
optional commitments for future settlement, which areexchange traded or executed over the counter (OTC). These
instruments are used to (1) manage exposure to certain
asset classes and/or various market risks, (2) arbitrage
mispricings of related securities and (3) to manage theinterest, cost and risk associated with its outstanding and/or future debt. These instruments are classified as due
to/from brokers and may include option, swap, credit
default, interest rate, and forward contracts. These types of
instruments are primarily valued using industry standard
models with independent market inputs, or by broker
quotes. Inputs such as prices, spreads, curves, and/or broker
quotes are evaluated for source reliability and consistency
with industry standards. Counterparty marks obtained
and utilized to determine daily collateral requirements
are also used to corroborate input reasonability. The
University considers current market conditions includinginterest rate and credit risks in its evaluation of inputs,
pricing methodologies, and models utilized to determine
fair values.
In connection with its investments in derivatives, theUniversity maintains master netting agreements andcollateral agreements with its counterparties. These
agreements provide the University the right, in the eventof default by the counterparty (such as bankruptcy or a
failure to pay or perform), to net a counterparty’s rights andobligations under the agreement and to liquidate and offset
collateral against any net amount owed by the counterparty.
Collateral, generally in the form of debt obligations issued
by the US Treasury, is exchanged on a daily basis asrequired by fluctuations in the market.
Specific credit limits are established for counterparties
based on their individual credit ratings. Credit limits
are monitored daily by the University and are adjusted
according to policy, as necessary. Some of the financial
instruments entered into by the University contain creditrisk-related contingency features that allow the parties to theagreement to demand immediate payment for outstanding
contracts and/or collateral.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

28

The following table presents information about the University’s derivatives by primary risk exposure for the years ended
June 30, 2022 and 2021 (in thousands of dollars):

Primary risk exposure
Equity instruments
Fixed income instruments1
Currency instruments
Credit instruments
SUBTOTALAs of June 30, 2022
Average
Gross
Gross
Quarterly
derivative
derivative
Notional
assetsliabilities$ 5,009,087$ 79,784$ 130,849
117,000
8,609
6,867
1,628
1,626
4,752
4,777
$ 86,189$ 141,084

For theyear ended
June 30, 2022

As of June 30, 2021
Average
Gross
Gross
Quarterly
derivative
derivative
Net profit/
Notional
assetsliabilities(loss)4$ 484,118 $ 5,904,280$ 88,221$ 179,670
19,169117,000
31,313
2,290
7,951
5,966
5,963
(24)
4,747
4,729
$ 505,553$ 98,916$ 216,946

TOTAL COUNTERPARTY
NETTING 2(68,643)(68,643)(85,005)(85,005)

NET AMOUNTS INCLUDEDIN THE CONSOLIDATEDBALANCE SHEETS 3

17,54672,441

13,911

131,941

Collateral
Cash collateral received/posted
Securities collateral received/
posted5

9,606

156,1213,183

250,592

TOTAL SECURITIES COLLATERALRECEIVED/POSTED 5

9,721

156,1218,650

250,592

NET AMOUNT

7,825(83,680)

5,261(118,651)0$ 5,261

NET AMOUNT IN ACCORDANCEWITH ASC 2106

115

$ 7,825

For theyear ended
June 30, 2021
Net profit/(loss)4$ (726,954)
9,272
3,163
(49)
$ (714,568)

5,467

$

$

0

1 For the year ended June 30, 2022 and 2021 the balance represents an interest rate exchange swap on the University’s debt portfolio.

2 GAAP permits the netting of derivative assets and liabilities and the related cash collateral received and paid when a legally enforceable master netting

agreement exists between the University and a derivative counterparty.

3 Included within the “Investment portfolio, at fair value” and “Other liabilities associated with the investment portfolio” line items of the Consolidated

Balance Sheets.

4 Included within “Realized and change in unrealized (depreciation)/appreciation, net” within the Consolidated Statements of Changes in Net Assets.
5 Includes securities posted to meet initial margin requirements on exchange traded futures.
6 Excludes any over‑collateralized amounts in accordance with ASC 210.

External advisors
Investments managed by external advisors include
investments in private equity, real estate, natural resources,
hedge funds, and other externally managed funds. The
University generally utilizes the capital account balance
provided by the external advisor as a practical expedient
to fair value. To evaluate the adequacy of these fair value
measurements, the University has assessed factors
including, but not limited to, the external advisor’s
adherence to fair value principles in calculating the capital
account balance, the existence of transactions at NAV at
the measurement date and the existence or absence ofPrivate equity funds
Real estate funds
Other externally managed funds3
TOTAL

Fair value1$ 17,394,411
3,052,042
3,259,851$ 23,706,304

certain restrictions at the measurement date. In addition,
the University evaluates these external advisors throughongoing due diligence and operational oversight, which
includes an analysis of an advisor’s use of and adherence tofair value principles.
The University, as an investor, has commitments to makeperiodic contributions in future periods to the investments
managed by external advisors. The amounts of these
expected disbursements as of June 30, 2022 and 2021 aredisclosed below (in thousands of dollars):

As of June 30, 2022
Remaining
Estimated
unfundedremaining life2
commitments$ 8,858,770
4 – 102,068,329
4 – 102,902,708
2–8$ 13,829,807

Fair value1$ 16,240,336
2,881,483
3,654,807$ 22,776,626

As of June 30, 2021
Remaining
Estimated
unfundedcommitments remaining life2$ 7,688,416
4 – 101,856,495
4 – 102,921,156
2–8$ 12,466,067

1 Represents the fair value of the funded portion of investments with remaining unfunded commitments.
2 The estimated remaining lives of these funds, expressed in years, are forward‑looking projections based on the University’s estimates and could vary significantly

depending on the investment decisions of external managers, changes in the University’s investment portfolio, and other circumstances.

3 Investments in externally managed funds primarily include exposures to hedge funds and natural resources.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

29

Investments in externally managed funds generally have
limited redemption options for investors and, subsequent
to final closing, may or may not permit subscriptions by
new or existing investors. These entities may also have theability to impose gates, lockups and other restrictions on an
investor’s ability to readily redeem out of their investment
interest in the fund.

Direct investments
Direct investments are primarily valued using a
combination of independent appraisals and/or one ormore industry standard valuation techniques (e.g., income
approach, market approach, or cost approach). The income
approach is primarily based on the investment’s anticipatedfuture income using one of two principal methods: thediscounted cash flow method or the capitalization method.
Inputs and estimates developed and utilized with thesetechniques may be subjective, unobservable, and require
judgment regarding significant matters such as estimating
the amount and timing of future cash flows, forward pricing
assumptions and the selection of discount and capitalization
rates that appropriately reflect market and credit risks.

The market approach derives investment value throughcomparison to recent and relevant market transactions
with similar investment characteristics. The cost approach
is utilized when the cost of the investment is determined
to be the best representation of fair value. This method istypically used for newly purchased or undeveloped assets.
When applicable, the University examines market dataand collaborates closely with independent appraisers toarrive at the best estimation of fair value for each respective
asset. The HMC Board of Directors discusses the valuation
process and results with HMC management, and makes
determinations on significant matters impacting valuationthat may arise from time to time.
The following table presents the ranges of significant
unobservable inputs used to value the University’s Level 3
assets. While the inputs described below represent therange of inputs utilized as of the measurement date, these
inputs may change over time, which may have a material
effect on the valuation of these types of investments inthe future.

As of June 30, 2022

Significant unobservable input
by asset class1
High yield:
Income approach discount rate
Collateral coverage recovery rate
EBITDA multiple
Real estate:
Income approach discount rate
Income approach growth rate
Discount for lack of marketability
Private equity:
Income approach discount rate
Cost multiple
EBITDA multiple
Other liabilities subject to fair valueMarket interest rate
NET AMOUNTLevel 3
investments
subject tofair value(in thousandsof dollars)2$ 279,893

As of June 30, 2021

Range ofinputs utilized in
valuation model3

Weighted
averageof inputs
utilized in
valuation
model

7.7% – 14.9%100%
5.3x – 23.0x

9.8%
100%
8.6x

14.5%
3.0%
15.0%

14.5%
3.0%
15.0%

8.0% – 14.0%
3.1x

13.6%
3.1x

2.4% – 3.7%

3.3%

Level 3
investments
subject tofair value(in thousandsof dollars)2$ 239,573

17,391

Range ofinputs utilized in
valuation model3

Weighted
averageof inputs
utilized in
valuation
model

6.0% – 16.1%
100%
7.5x – 19.0x

7.7%
100%
8.8x

14.5%
3.0%
15.0%

14.5%
3.0%
15.0%

6.0% – 15.0%
2.5x
9.0x

14.3%
2.5x
9.0x

2.5% – 2.8%

2.6%

17,391

121,108

207,033(154,949)(148,728)$ 263,443$

315,269

1 The fair value of investments may be determined using multiple valuation techniques.
2 Included within Level 3 investments is $1,517,162 and $2,244,931 as of June 30, 2022 and 2021, respectively, which were valued using other inputs including,but not limited to, single source broker quotations, third party pricing and recent transactions.

3 The range of inputs encompasses a variety of investment types within each asset class.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30

4. RECEIVABLES
The major components of receivables, net of reserves for
doubtful accounts of $16.5 million and $13.7 million as ofJune 30, 2022 and 2021, respectively, were as follows (inthousands of dollars):

2022
67,13063,48461,54532,525
19,584
13,15917,34465,021$ 339,792

Federal sponsored support
Executive education
Publications
Leases
Tuition and fees
Non-federal sponsored support
Gift receipts
Other
TOTAL RECEIVABLES, NET$

2021
57,321
73,40055,05832,731
20,774
11,536
7,985
63,677$ 322,482$

5. NOTES RECEIVABLE
Notes receivable are recorded initially at face value plus accrued interest, which approximates fair value. Notes receivable, andrelated allowance for doubtful accounts, were as follows (in thousands of dollars):Student loans:
Government revolving
Institutional
Total student loans
Faculty and staff loans
Other loans
TOTAL

Receivable

2022
Allowance$$

26,754
72,48999,243
277,234
49,448$ 425,925

$

643
1,644
2,287
179
42,647
45,113Government revolving loans are funded principally withfederal advances to the University under the Perkins Loan,
the Health Professions Student Loan (HPSL) and Loansfor Disadvantaged Students in Health Professions (LDS)
Programs. These advances totaled $29.5 million and$35.8 million as of June 30, 2022 and 2021, respectively,
and are classified as liabilities in the Consolidated Balance
Sheets. During fiscal year 2018, the Perkins Loan Program
ended and as a result the University began making required
repayments to the government. In fiscal year 2022, theUniversity made the requested $5.9 million repayment.
Interest earned on the revolving and institutional loan
programs is reinvested to support additional loans. The
repayment and interest rate terms of the institutional loans
vary considerably.
Faculty and staff notes receivable primarily consists ofmortgage and educational loans. Mortgages include
shared appreciation loans, loans that bear interest at theapplicable federal rate and interest-free loans. In addition,

Net$

26,111
70,84596,956
277,055
6,801$ 380,812

Receivable

2021
Allowance$$

31,93377,306109,239
252,090
57,615$ 418,944

$

832
2,237
3,069
179
38,10041,348

Net$

31,10175,069106,170
251,911
19,515$ 377,596

certain mortgages that bear interest at the current market
rate or applicable federal rate may be subsidized for an
initial period. The educational loans are primarily zerointerest loans.
The University assesses the adequacy of the allowancefor doubtful accounts by evaluating the loan portfolio,
including such factors as the differing economic risks
associated with each loan category, the financial condition of
specific borrowers, the economic environment in which theborrowers operate, the level of delinquent loans, the valueof any collateral, and, where applicable, the existence of any
guarantees or indemnifications. In addition to these factors,
the University reviews the aging of the loans receivable andthe default rate in comparison to prior years. The allowanceis adjusted based on these reviews. The University considers
the allowance at June 30, 2022 and 2021 to be reasonable
and adequate to absorb potential credit losses inherent in
the loan portfolio.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

31

6. PLEDGES RECEIVABLE
Unconditional promises to donate to the University in the
future are initially recorded at fair value (pledge net of
discount) and subsequently amortized over the expected
payment period, net of an allowance for uncollectible
pledges. The University’s indicative 1- to 15-year taxable
unsecured borrowing rate is used to discount pledges
receivable at the end of the fiscal year they are received.
Discounts of $246.6 million and $76.3 million for the years
ended June 30, 2022 and 2021, respectively, were calculatedusing rates ranging from 1.0% to 3.9%.
Pledges receivable included in the financial statements asof June 30, 2022 and 2021 are expected to be realized asfollows (in thousands of dollars):Within one year
Between one and five years
More than five years
Less: discount and allowance foruncollectible pledges
TOTAL PLEDGES RECEIVABLE, NET2022$ 816,775
1,637,886
541,6412021$ 660,300
1,673,468
257,232(403,868)$ 2,592,434(255,042)$ 2,335,958

Pledges receivable as of June 30, 2022 and 2021 havebeen designated for the following purposes (in thousandsof dollars):
2022

2021

General Operating Account balances:
Gifts for current use
Non-federal sponsored awards
Construction and life income
Total General Operating Account balances$ 665,632
186,725
306,891
1,159,248$ 533,952
184,113352,8021,070,867

Endowment
TOTAL PLEDGES RECEIVABLE, NET

1,433,186$ 2,592,434

1,265,091$ 2,335,958

Because of uncertainties with regard to realizability
and valuation, bequest intentions and other conditional
promises are only recognized as assets if and when thespecified conditions are met. Non-bequest conditional
pledges totaled $110.0 million and $115.1 million as ofJune 30, 2022 and 2021, respectively.

7. FIXED ASSETS
Fixed assets are reported at cost or, if a gift, at fair value
as of the date of the gift, net of accumulated depreciation.
Depreciation is computed using the straight-line method
over the estimated useful lives of the assets.

The major categories of fixed assets as of June 30, 2022 and2021 are summarized as follows (in thousands of dollars):

Research facilities
Classroom and office facilities
Housing facilities
Other facilities
Service facilities
Libraries
Museums and assembly facilities
Athletic facilities
Land
Construction in progress
Equipment
SUBTOTAL AT COST
Less: accumulated depreciation
FIXED ASSETS, NET2022$ 3,418,161
2,543,625
2,525,545
425,737
1,114,162
541,080
990,568
263,825
1,024,986
357,434
1,468,066
14,673,189(6,230,349)$ 8,442,840

2021$ 3,364,398
2,395,225
2,408,385
460,640
1,065,126
534,930
987,906
259,254
1,024,697
401,316
1,429,723
14,331,600(5,868,592)$ 8,463,008

Estimated useful life
(in years)
*
35
35
35
35
35
35
35
N/A
N/A
**

* Estimated useful lives of components range from 10 to 45 years.
** Estimated useful lives of equipment range from 4 to 15 years.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

32

Certain University facilities are subject to restrictions as
to use, structural modifications, and ownership transfer.
Included in the fixed asset balances are restricted facilities
with a net book value of $267.4 million and $280.7 million
as of June 30, 2022 and 2021, respectively.
The costs of research facilities are separated into theshell, roof, finishes, fixed equipment, and services. These
components are separately depreciated.
Equipment includes general and scientific equipment,
computers, software, furniture, and vehicles.

The University has asset retirement obligations of$189.2 million and $200.1 million, which are included in“Deferred revenue and other liabilities” in the Consolidated
Balance Sheets as of June 30, 2022 and 2021, respectively.
Right-of-use assets from finance leases of $52.3 million
and $59.0 million are included in “Fixed assets” in theConsolidated Balance Sheets as of June 30, 2022 and
2021, respectively. Lease liabilities from finance leases of$88.2 million and $96.8 million are included in “Deferred
revenue and other liabilities” in the Consolidated Balance
Sheets as of June 30, 2022 and 2021, respectively.

8. ENDOWMENT AND GENERAL OPERATING ACCOUNT NET ASSETSThe University’s net assets consisted of the following as of June 30, 2022 and 2021 (in thousands of dollars):
2022
Without
donor
restrictions

With donor
restrictions

2021

Total

Without
donor
restrictions

With donor
restrictions

Total

NATURE OF SPECIFIC NET ASSETS
Perpetual endowment funds
Endowment funds and appreciation subject todistribution policy and appropriation
Endowment funds without restriction, board
designated and subject to distribution policy
Pledge balancesInterests in trusts held by others
TOTAL ENDOWMENT
Operating
Unexpended contributions andendowment distributions
Student loan funds
TOTAL GENERAL OPERATING ACCOUNT
Split interest agreements (Note 9)
TOTAL NET ASSETS$ 9,057,578 $ 9,057,578
30,925,321

30,925,321

1,433,186
403,626
41,819,711

9,057,969
1,433,186
403,626
50,877,680
6,519,858$ 9,057,969

9,057,969
6,519,858

3,048,468
3,048,468
100,148
100,148
6,519,858
3,148,616
9,668,474
700,540
700,540$ 15,577,827 $ 45,668,867 $ 61,246,694

Endowment
The University’s endowment consists of approximately
14,400 separate funds established over many years fora wide variety of purposes. Endowment fund balances
are classified and reported in accordance with donor
specifications and state law. The endowment includes both
donor-restricted endowment funds and funds functioning
as endowment which are not subject to donor-imposed
restrictions, however decisions to spend their principal
require the approval of the Corporation and therefore areclassified as Board-designated endowment funds. The
majority of the endowment is invested in the GIA (Note 3).
The University is also the beneficiary of certain irrevocable
trusts held and administered by others. The estimated fairvalues of trust assets, which include the present valuesof expected future cash flows from outside trusts and the$ 8,562,120 $ 8,562,120
33,434,803

33,434,803

1,265,091
480,684
43,742,698

9,423,055
1,265,091
480,684
53,165,753
6,588,391$ 9,423,055

9,423,055
6,588,391

2,747,969
2,747,969
99,631
99,631
6,588,391
2,847,600
9,435,991
773,330
773,330$ 16,011,446 $ 47,363,628 $ 63,375,074

fair value of the underlying assets of perpetual trusts, arerecognized as assets and increases in net assets when therequired trust documentation is provided to the University.
The fair values of these trusts are provided by the external
trustees and are adjusted annually by the University.
These are included as Level 3 investments in the fair value
hierarchy table in Note 3.
The University’s endowment distribution policies aredesigned to preserve the value of the endowment in realterms (after inflation) and generate a predictable streamof available income. Each fall, the Corporation approves
the endowment distribution for the following fiscal year.
Distribution from an underwater endowment fund (a fundbelow its historic dollar value) could continue in limited anddefined circumstances under the University’s endowment

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

33

distribution policy. To the extent that the fair value of adonor restricted endowment fund falls below its historic
dollar value it would be reported as a reduction of net assets
with donor restrictions.
At June 30, 2022 and 2021, funds in a deficit position
were reported in net assets with donor restrictions and arecomprised as follows (in thousands):
2022

2021

Fair value of underwater endowment funds
Historic dollar value$ 369,782
378,931$ 23,401
24,253TOTAL DEFICIT OF UNDERWATERENDOWMENT FUNDS$(9,149) $(852)

The endowment distribution is based in part on
presumptive guidance from a formula that is intended toprovide budgetary stability by smoothing the impact ofannual investment gains and losses. The formula’s inputs
reflect expectations about long-term returns and inflation
rates. For fiscal year 2022, the endowment distribution
approved by the Corporation (prior to decapitalizations) was
equal to 4.2% of the fair value of the endowment invested
in the GIA as of the beginning of the fiscal year. The total
endowment distribution made available for operations

was $2.1 billion and $2.0 billion in fiscal year 2022 and
2021, respectively.
Each year the Corporation also approves certain
decapitalizations from the endowment to support strategic,
mission-critical activities or objectives that are typically
one-time or time-limited and therefore, are excluded fromnet operating surplus. These decapitalizations totaled$36.7 million and $32.8 million in fiscal year 2022 and
2021, respectively. These additional decapitalizations, in
combination with the endowment distribution, resulted
in an aggregate payout rate of 4.2% and 5.2% in fiscal year
2022 and 2021, respectively.

General operating account
The GOA consists of the general or current funds of the
University as well as the assets and liabilities related to
student and faculty loans and facilities. The GOA accepts,
manages, and pays interest on deposits made by University
departments; invests surplus working capital; makes loans;
and arranges external financing for major capital projects.
It is used to manage, control, and execute all University
financial transactions, except for those related to investment
activities conducted by HMC.

9. SPLIT INTEREST AGREEMENTS
Under split interest agreements, donors enter into trust
or other arrangements with the University in which the
University receives benefits that are shared with otherbeneficiaries and institutions. Split interest agreement (SIA)
investment assets are invested primarily in the GIA andpublicly-traded securities, a small segment is managed by
an external advisor, and all are recorded in the “Investment
portfolio, at fair value” in the University’s Consolidated
Balance Sheets. Additional disclosures are included in
Note 3. Associated liabilities are recorded at the present
value of estimated future payments due to beneficiaries andother institutions. These liabilities are calculated using the
University’s current taxable unsecured borrowing rate of
3.5% and 1.0% as of June 30, 2022 and 2021, respectively. All
split interest agreement net assets and the respective activity
are reported within net assets with donor restrictions. Upon
termination of a split interest agreement, the net assets aretransferred to the GOA or endowment accordingly.
The changes in split interest agreement net assets forfiscal years 2022 and 2021 were as follows (in thousandsof dollars):2022

Investment return:
Investment income
Realized and change in unrealized (depreciation)/appreciation, net
Total investment return
Gifts (Note 14)1
Payments to annuitants
Transfers to endowment
Transfers between SIA and the GOA
Change in liabilities and other adjustments
NET CHANGE DURING THE YEAR
Total split interest agreement net assets, beginning of year
TOTAL SPLIT INTEREST AGREEMENT NET ASSETS, END OF YEAR$$

17,152(158,186)(141,034)
12,290(76,057)(18,603)(25,213)
175,827(72,790)773,330
700,540

2021
$

$

9,961
402,937
412,898
10,761(71,358)(16,830)(21,019)(139,315)
175,137
598,193773,330

1 Shown at net present value. The undiscounted value of these gifts was $26,626 and $35,078 for the years ended June 30, 2022 and 2021, respectively.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

34

Split interest agreement net assets as of June 30, 2022 and 2021 consisted of the following (in thousands of dollars):
Split interest agreement investments (Note 3)
Charitable remainder trusts
Charitable lead trusts
Charitable gift annuities
Pooled income funds
Total split interest agreement investments1

2022

2021

$ 1,039,122
101,899
305,536
140,000
1,586,557$ 1,170,553
116,254
342,917
162,963
1,792,687(819,802)(66,215)(886,017)(930,260)(89,097)(1,019,357)

Liabilities due under split interest agreements:
Amounts due to beneficiaries
Amounts due to other institutions
Total liabilities due under split interest agreements
TOTAL SPLIT INTEREST AGREEMENT NET ASSETS, END OF YEAR$

700,540$

773,330

1 For the year ended June 30, 2022, $934,970 of SIA investments are held in the pooled general investment account and $651,587 of SIA investments are held in

the other investments outside the general investment account. For the year ended June 30, 2021, $1,021,209 of SIA investments are held in the pooled generalinvestment account and $771,478 of SIA investments are held in the other investments outside the general investment account. Refer to Note 3.

10. BONDS AND NOTES PAYABLE
Bonds and notes payable as of June 30, 2022 and 2021 were as follows (in thousands of dollars):
Fiscal yearof issueFiscal year of
final maturity1

Effective
rate2

Outstanding principal
20223
20213

2000-2006
2000

2032
2036

0.1%
0.2%
0.1%

2010
2017
2020
2022

2022
2041
2031
2033

4.9%
4.0%
4.1%
4.2%
4.1%

1,461,370
346,680
207,830
2,015,880

3.7%

2,248,535

2,133,050

5.6%
6.5%
4.9%
3.4%
3.3%
2.5%
3.8%
4.1%

243,000
500,000
300,000
402,000
1,000,000
500,000
500,000
3,445,000

243,000
500,000
300,000
402,000
1,000,000
500,000

4.1%

3,445,000

2,945,000

Various83,796
360,763(20,891)$ 6,117,203

88,355355,467(18,673)$ 5,503,199

TAX-EXEMPT BONDS:
Variable-rate demand bonds:
Series R – daily
Series Y – weekly
Total variable-rate bonds
Fixed-rate bonds:
Series 2010A
Series 2016A
Series 2020A
Series 2022B
Total fixed-rate bonds
TOTAL TAX-EXEMPT BONDS$

114,750
117,905
232,655$

131,200
117,905
249,105

49,5901,487,675
346,680
1,883,945

TAXABLE BONDS
Fixed-rate bonds:
Series 2008A
Series 2008D
Series 2010C
Series 2013A
Series 2016B
Series 2020B
Series 2022A
Total fixed-rate bonds

2008
2009
2011
2013
2017
2020
2022

2039
2039
2041
2038
2057
2051
2053

TOTAL TAXABLE BONDS
Notes payable
Unamortized original issuance premium/discount, net
Unamortized bond issuance costs
TOTAL BONDS AND NOTES PAYABLE

Various

Various3.9%

2,945,000

1 The weighted average maturity of the portfolio on June 30, 2022 was 18.5 years.
2 For fixed‑rate bonds the effective rate is calculated as: coupon rate x (par value / book value*). For variable rate bonds the effective rate is the one‑year averagerate. Effective rates are exclusive of the Series Y interest rate exchange agreement, which would increase the overall portfolio rate by 0.06% (3.96% vs. 3.90%).
*Book value = par value + unamortized original issuance premium ‑ unamortized original issuance discount, underwriter’s discount, and cost of issuance.
3 Par only—balances exclude original issuance premiums/discounts.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

35

Interest expense related to bonds and notes payable, netof amortization and accretion, was $183.0 million and$180.6 million for fiscal 2022 and 2021, respectively. Theinterest expense in the Consolidated Statements of Changes
in Net Assets with General Operating Account Detail includes
additional components related to capital leases. Excluding
unamortized discounts and premiums, unamortizedunderwriter’s discount and unamortized cost of issuance,scheduled principal payments are (in thousands of dollars):

The University has one unsecured, revolving credit facility
with a syndicate of banks totaling $1.5 billion, which expires
in March 2024. The facility was renewed in March 2021.
There was no outstanding drawn balance on the credit
facility at June 30, 2022.

Fiscal year
2023
2024
2025
2026
2027
Thereafter
TOTAL PRINCIPAL PAYMENTS

The University has tax-exempt commercial paper available
totaling $1 billion. There was no outstanding drawn balanceon the tax-exempt commercial paper line at June 30, 2022.
In August 2021, the University obtained reauthorization of
its tax-exempt commercial paper program.

Principal payments$
42,06092,25341,441
100,967
102,795
5,397,815$ 5,777,331

In fiscal year 2022, the University issued $500 million of
taxable fixed-rate Series 2022A Bonds and $250 million($207.8 million par) of tax-exempt fixed-rate Series 2022B
Bonds, which were designated and independently verified asGreen Bonds. Proceeds from the Series 2022A issue will be
used to finance future University capital spending. Proceedsfrom the Series 2022B issue will be used to finance orrefinance three sustainable capital projects on campus, in
support of the University’s sustainability goals.

The University has taxable commercial paper available
totaling $2 billion. There was no outstanding drawn balanceon the taxable commercial paper line at June 30, 2022.

As of June 30, 2022, the University had $232.7 millionof variable rate demand bonds outstanding with eithera daily or weekly interest rate reset. In the event that the
University receives notice of any optional tender on its
variable rate demand bonds, or if the bonds become subject
to mandatory tender, the purchase price of the bonds will be
paid from the remarketing of such bonds. However, if theremarketing proceeds are insufficient, the University will
have a general obligation to purchase the bonds tenderedwith cash on hand.

Interest rate exchange agreements
Offsetting the fiscal year 2022 bond issuances were$97.0 million of principal maturities, along with
$36.9 million of amortizing bond premium (net ofamortizing fees and issuance discounts), resulting in an
overall increase to the University’s bonds and notes payablefrom $5.5 billion to $6.1 billion.
The University is rated Aaa by Moody’s Investors Service
and AAA by Standard & Poor’s Global Ratings. Both the
Moody’s rating and the Standard & Poor’s rating were reaffirmed in February 2022. Additionally, both Moody’s andStandard & Poor’s rated Harvard’s Series 2022A and Series
2022B bond issuances Aaa/AAA in April 2022.

In fiscal 2022, the University had in place one interest rateexchange agreement, used to manage the interest cost andrisk associated with a portion of its outstanding variable
rate debt.
The fair value of the interest rate exchange agreement
was ($8.6) million and ($31.3) million as of June 30, 2022
and 2021, respectively, and is recorded in “Other liabilities
associated with the investment portfolio” on the University’s
Consolidated Balance Sheets.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

36

11. EMPLOYEE BENEFITSThe University offers current employees a choice of
health plans, a dental plan, short-term and long-term
disability plans, life insurance, tuition assistance, anda variety of other benefits such as subsidized passes for
public transportation and for Harvard athletic facilities.
In addition, the University has retirement plans covering
substantially all employees.
The University uses a measurement date of June 30 for its
pension and postretirement health plans.

In accordance with the Employee Retirement Income
Security Act (ERISA) requirements, the University has
established a trust to hold plan assets for its defined
benefit pension plans. The fair value of the trust’s assets
was $851.2 million and $1.1 billion as of June 30, 2022
and 2021, respectively. During fiscal years 2022 and 2021,
the University made cash contributions to the defined
benefit pension plan of $20.0 million and $61.2 million,
respectively. The University recorded expenses for its
defined contribution plans of $155.1 million for fiscal year
2022 and $153.4 million for fiscal year 2021.

457(b) deferred compensation plan
The University offers a non-qualified deferred compensation
plan under Internal Revenue Code 457(b) to a select groupof employees. There is no University contribution related
to the plan. The University has recorded both an asset anda liability related to the plan of $191.5 million as of June 30,
2022 and $207.8 million as of June 30, 2021; the assets
are included in “Prepayments and deferred charges” andthe liabilities are included in “Deferred revenue and otherliabilities” on the University’s Consolidated Balance Sheets.

Postretirement health benefits

Pension benefits

The following table sets forth the pension and postretirement
plans’ funded status that is reported in the Consolidated
Balance Sheets as of June 30, 2022 and 2021 (in thousandsof dollars):All eligible faculty members and staff are covered byretirement programs that include a defined benefit
component, a defined contribution component, or a
combination of the two.

The University provides postretirement health coverage andlife insurance to substantially all of its employees. As ofJune 30, 2022, the University had internally designated andinvested $1.0 billion in the GIA to fund the postretirement
health benefit accrued liability of $835.2 million. As ofJune 30, 2021, the University had internally designatedand invested $1.0 billion to fund the postretirement healthbenefit accrued liability of $1.0 billion.

Pension benefits
2022
Change in projected benefit obligation:
Projected benefit obligation, beginning of year
Service cost
Interest cost
Plan participants’ contributions
Gross benefits paid
Actuarial gain
Plan amendments
Special termination benefits1$ 1,139,945
11,20834,980$ 1,220,094
12,95036,673(52,631)(188,991)(103,677)(26,555)

944,511

1,139,945

1,061,693(177,857)
20,000959,414
144,732
61,224

Postretirement health benefits
2022
2021
$ 1,000,395
32,54232,643
9,527(40,664)(199,211)(24)$

955,571
32,96132,728
8,361(25,125)(4,101)

460

PROJECTED BENEFIT OBLIGATION, END OF YEAR 2
Change in plan assets:
Fair value of plan assets, beginning of year
Actual return on plan assets
Employer contributions
Plan participants’ contributions
Gross benefits paid
FAIR VALUE OF PLAN ASSETS, END OF YEARUNFUNDED STATUS 3

2021

$

835,208

1,000,395

16,765
8,361(25,126)(52,631)(103,677)

31,137
9,527(40,664)

851,205

1,061,693

00(835,208)$ (1,000,395)(93,306)$(78,252)$

1 Represents costs associated with a voluntary early retirement program offered to plan participants.
2 Measurement of the University’s pension obligation including assumed salary increases (required by GAAP).
3 These amounts totaling $928,514 as of June 30, 2022 and $1,078,647 as of June 30, 2021 are included in the “Accrued Retirement Obligations” line in theConsolidated Balance Sheets.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

37

The accumulated pension benefit obligation (ABO) is ameasurement of the University’s pension benefit obligation,
based on past and present compensation levels and does
not include assumed salary increases. The ABO was$846.8 million at June 30, 2022 and $1.0 billion at June 30,
2021. The funded status disclosed above has been preparedin accordance with pension accounting rules. Whenmeasured on an IRS funding basis, which informs the
University’s required cash contribution amount, the plan
was overfunded at January 1, 2022.

Net periodic benefit cost
Components of net periodic benefit cost and other amounts
recognized in the Consolidated Statements of Changes
in Net Assets with General Operating Account Detail aresummarized as follows for the years ended June 30, 2022
and 2021 (in thousands of dollars):Pension benefits
2022
2021
Components of net periodic benefit cost:
OperatingService cost
Special termination benefits
Total operating activity
Non-operating
Interest cost
Expected return on plan assets
Amortization of:Actuarial loss/(gain)
Prior service cost/(credit)
Total non-operating activity1
Total net periodic benefit cost
Other amounts recognized in non-operating activity
in unrestricted net assets:
Current year net actuarial loss/(gain)
Plan amendments
Amortization of:Prior service (cost)/credit
Actuarial (loss)/gain
Total other amounts recognized in non-operating activity1
TOTAL RECOGNIZED IN CONSOLIDATED STATEMENTS
OF CHANGES IN NET ASSETS WITH GENERAL OPERATINGACCOUNT DETAIL$$

11,208

Postretirement health benefits
2022
2021

$ 32,542$ 32,961

11,208$ 12,950
460
13,41032,54232,961

34,980(40,026)

36,673(47,300)

32,64332,728

7,242
287
2,483
13,691

16,230288
5,891
19,301(4,650)(7,929)20,06452,606(5,116)(7,929)19,68352,64428,893(123,987)(199,211)(24)(4,101)(287)(7,242)
21,364(288)(16,230)(140,505)

7,929
4,650
(186,656)

7,929
5,116
8,944

35,055$ (121,204)$ (134,050)$ 61,588

1 These amounts totaling ($142,745) in fiscal year 2022 and ($105,987) in fiscal year 2021 include gains and losses and other changes in the actuariallydetermined benefit obligations arising in the current period but that have not yet been reflected within net periodic benefit cost/(income) and are includedin the “Change in Retirement Obligations” line in the Consolidated Statements of Changes in Net Assets with General Operating Account Detail.

Cumulative amounts recognized as non-operating changes in net assets without donor restrictions are summarized asfollows for the years ended June 30, 2022 and 2021 (in thousands of dollars):

Net actuarial loss/(gain)
Prior service cost/(credit)
CUMULATIVE AMOUNTS RECOGNIZED IN
UNRESTRICTED NET ASSETS$$HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pension benefits
2022
2021
62,248$ 40,596
320
607

Postretirement health benefits
2022
2021
$ (362,492)$ (167,932)(33,765)(41,670)

62,568$ (396,257)$

41,203$ (209,602)38

Other assumptions and health care cost trend rates used in determining the year end obligation as well as the net periodic
benefit (income)/cost of the pension and postretirement health plans are summarized as follows for fiscal years 2022
and 2021:
Pension benefits
2022
2021
Weighted-average assumptions used to determine benefit obligation
as of June 30:
Discount rate
Compensation increase trend:
Average rate
Initial rate
Ultimate rate
Year of ultimate
Cash balance (or similar formula) interest crediting ratePension increases for in-payment benefits increase trend:
Average rate
Initial rate
Ultimate rate
Year of ultimate
Health care cost trend rate:
Current rate
Ultimate rate
Year of ultimate
Weighted-average assumptions used to determine net periodic
benefit (income)/cost:
Discount rate
Expected long-term rate of return on plan assets
Compensation increase trend:
Average rate
Initial rate
Ultimate rate
Year of ultimate
Pension increases for in-payment benefits increase trend:
Average rate
Health care cost trend rate:
Initial rate
Ultimate rate
Year of ultimate

The expected return on pension plan assets is determinedby utilizing an independent advisor’s capital markets model,
which takes into account the expected real return, before
inflation, for each of the pension portfolio’s asset classes,
as well as the correlation of any one asset class to every
other asset class. This model calculates the real returns
and correlations and derives an expected real return for theentire portfolio, given the percentage weighting allocated toeach asset class. After calculating the expected real return,an assessment is made to accommodate the expected

Postretirement health benefits
2022
2021

5.05%

3.15%

4.90%

3.20%

N/A
5.00%
3.50%
2025

3.50%
N/A
N/A
N/A

N/A
5.00%
3.50%
2025

3.50%
N/A
N/A
N/A

5.25%

5.25%

N/A

N/A

N/A
1.50%
0.25%
2025

0.25%
N/A
N/A
N/A

N/A
N/A
N/A
N/A

N/A
N/A
N/A
N/A

N/A
N/A
N/A

N/A
N/A
N/A

7.00%
5.00%
2029

6.50%
4.75%
2025

3.15%
4.50%

3.15%
5.50%

3.20%
N/A

3.35%
N/A

3.50%
0.00%
N/A
N/A

3.50%
0.00%
0.25%
2025

3.50%
N/A
N/A
N/A

3.50%
N/A
N/A
N/A

0.25%

0.00%

N/A

N/A

N/A
N/A
N/A

N/A
N/A
N/A

6.50%
4.75%
2025

6.50%
4.75%
2025

inflation rate for the forthcoming period. The final expected
return on assets is the aggregate of the expected real returnplus the expected inflation rate.

Plan assets
The actual asset allocation of the investment portfolio forthe pension plan at June 30, 2022 and 2021, along withtarget allocations for June 30, 2023, is as follows:

Asset allocation by category for pension plan:
Fixed income securities
Equity securities
Cash
TOTAL OF ASSET ALLOCATION CATEGORIESHARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2023 Target

June 30, 2022

June 30, 2021

75-85%
15-25
1-5

79.7 %
19.6
0.7
100.0 %

77.0 %
19.8
3.2
100.0 %

39

University expects to keep this strategy in future years. The
investment program is also managed to comply with all
ERISA regulations.

The University’s investment strategy for the pension
portfolio is to manage the assets across a broad anddiversified range of investment categories, both domestic
and international. The objective is to achieve a risk-adjusted
return that is in line with the long-term obligations that the
University has to the pension plan beneficiaries. During
fiscal year 2022, the University increased its allocation
to fixed income securities to manage the interest rate
volatility associated with its pension obligations. The

The following is a summary of the levels within the fairvalue hierarchy for the pension plan assets subject tofair value measurement as of June 30, 2022 and 2021 (inthousands of dollars):

2022

Level 1
PLAN ASSETS:
Cash and short-term investments
Domestic equity
Foreign equity
Domestic fixed income
Foreign fixed income
Emerging market equity and debt
Hedge funds
Private equity
High yield
PLAN ASSETS SUBJECT TO FAIR VALUE LEVELING
Other assets not subject to fair value
TOTAL PLAN ASSETS

Level 2

2021

Level 3

$ 17,942
87,02526,035

NAV aspractical
expedient$$ 36,921
633,453

12,880$ 143,882

PLAN LIABILITIES:Due to brokers
PLAN LIABILITIES SUBJECT TO FAIR VALUE LEVELING $TOTAL PLAN LIABILITIESExpected future benefit payments
Employer contributions of $10.0 million are expected forfiscal year 2023 to fund the pension benefit plan.

0

Total

$

0

$

0

265
1,368
35,313$ 707,320

$

0

$

0

$

0

Total

17,94287,02562,956
633,453
0
12,880265
1,368
35,313$ 851,202
3$ 851,205

57,999104,391
75,522746,979
8,479
22,895321
1,799
41,215$ 1,059,600
2,126$ 1,061,726

$
$
$

$
$
$

0
0
0

$

(33)
(33)
(33)

The following table summarizes expected benefit payments
and subsidies for pension and other postretirement healthbenefits for the University (in thousands of dollars):

Fiscal year
2023
2024
2025
2026
2027
Thereafter

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pension$ 65,446
65,42567,316
68,90870,132
361,470

Expected benefit payments
Postretirement health$ 26,643
28,97431,06833,57836,165
220,71340

12. STUDENT FINANCIAL AID
Financial aid granted to students in fiscal 2022 and 2021 is summarized as follows (in thousands of dollars):
2022
Scholarships and other student awards:
Scholarships applied to student income1
Scholarships and other student awards paid directly to students
Total scholarships and other student awards$

Student employment
Student loans
Agency financial aid2
TOTAL STUDENT FINANCIAL AID$

505,904
171,312677,216
93,581
14,12421,505806,4262021$$

435,959
160,744596,70384,27313,064
21,279715,319

1 Includes $224,863 and $164,232 in fiscal 2022 and 2021, respectively, of undergraduate scholarships applied to student income.
2 Represents aid from sponsors for which the University acts as an agent for the recipient.

13. SPONSORED SUPPORT
Total expenditures funded by US government sponsors
or by institutions that subcontract federally sponsored
projects to the University were $642.1 million and$625.0 million in fiscal year 2022 and 2021, respectively.
The University’s principal source of federally sponsoredfunds is the Department of Health and Human Services.
The University also has many non-federal sources ofsponsored awards and grants, including corporations,foundations, state and local governments, foreign
governments, and research institutes.

Sponsored grants and contracts normally provide for therecovery of direct and indirect costs. Recovery of related
indirect costs is generally recorded at fixed or predetermined
rates negotiated with the federal government and othersponsors. Predetermined federal indirect cost rates havebeen established for the University Area, the Medical
School (including the School of Dental Medicine), andthe T.H. Chan School of Public Health through fiscal year
2024. Funds received for federally sponsored activity are
subject to audit.

14. GIFTS
Gifts are classified as net assets with or without restrictionsin accordance with donor specifications.

Additionally, gifts are categorized by purpose as “Currentuse”, “Non-federal sponsored grants”, “Endowment funds”,“Split interest agreements”, or “Loan funds and facilities”.

Gifts received for the year ended June 30, 2022 are summarized as follows (in thousands of dollars):

Current use
Non-federal sponsored grants
Endowment funds
Split interest agreements1
Loan funds and facilities
TOTAL GIFTS

Gifts received$ 514,361
235,481579,987
12,29081,943$ 1,424,062

2022
Donor redesignations/other changes$ (9,625)(3,361)
3,663
5,931$ (3,392)

Total
504,736
232,120583,650
12,29087,874$ 1,420,670$

1 Shown at net present value. The undiscounted value of these gifts was $26,626 for the year ended June 30, 2022.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

41

Gifts received for the year ended June 30, 2021 are summarized as follows (in thousands of dollars):

Current use
Non-federal sponsored grants
Endowment funds
Split interest agreements1
Loan funds and facilities
TOTAL GIFTS

2021
Donor redesignations/other changes$(4,797)(2,789)2,028

Gifts received$ 545,756
211,571462,991
10,761
133,211$ 1,364,290

$

Total
540,959
208,782
465,019
10,761
135,488$ 1,361,009$

2,277(3,281)

1 Shown at net present value. The undiscounted value of these gifts was $35,078 for the year ended June 30, 2021.

15. OTHER REVENUE
The major components of other revenue for the years ended
June 30, 2022 and 2021 were as follows (in thousandsof dollars):Publications and royalties from copyrights
Royalties from the commercialization of
intellectual property1
Services income
Rental and parking2
Health and clinic fees
Sales income
Interest income
Other student income
Other
TOTAL OTHER REVENUE

2022

2021

$ 277,104$ 253,113

152,078

107,164

135,240
116,070
70,214
31,4238,373
4,326
43,495$ 838,323

96,44387,646
61,461
23,7037,079
3,582
53,724$ 693,915

1 Excludes distribution to external parties.
2 The University is the lessor of space and facilities under operating leases,

the income from which is included in rental and parking.

16. OTHER EXPENSES
The major components of other expenses for the years
ended June 30, 2022 and 2021 were as follows (inthousands of dollars):

Subcontract expenses undersponsored projects
Advertising
Publishing
TravelTaxes and fees
Insurance
Fixed asset impairments
Postage
Telephone
Other
TOTAL OTHER EXPENSESHARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022

2021

$ 179,212
53,00745,09743,73738,706
25,66921,385
14,907
11,15361,702$ 494,575$ 161,910
40,44439,316
1,965
35,294
15,74920,804
13,265
10,96845,110$ 384,825

42

17. FUNCTIONAL AND NATURAL CLASSIFICATION OF OPERATING EXPENSES
Operating expenses by functional classification for the years
ended June 30, 2022 and 2021 were as follows (in thousandsof dollars):

Operating expenses are allocated functionally on a direct
basis. Operations and maintenance expenses are allocatedbased on square footage.

2022

Salaries and wages
Employee benefits
Services purchased
Depreciation
Space and occupancy
Supplies and equipment
Interest
Scholarships and other student awards
Other expense and overhead allocations
TOTAL EXPENSES

Instruction andacademic support$ 1,149,598
286,322374,555
47,664
106,798
90,926
18,5491,866$ 2,076,278$

Research1
310,492
74,786
95,246
155,568
62,35555,364
43,775424,292$ 1,221,878

Student services
and support$ 144,458
49,84460,73916,52031,766
41,906
13,071
171,31228,407$ 558,023

Institutional
support andauxiliary$ 601,794
172,979
202,169
209,108
152,867
82,888112,139
40,010$ 1,573,954

Total$ 2,206,342
583,931732,709428,860
353,786
271,084
187,534
171,312494,575$ 5,430,133

1 The methodology used to allocate expenses for financial statement purposes is different than methodologies used for other purposes, such as

governmental surveys.

2021

Salaries and wages
Employee benefits
Services purchased
Depreciation
Space and occupancy
Supplies and equipment
Interest
Scholarships and other student awards
Other expense and overhead allocations
TOTAL EXPENSES

Instruction andacademic support$ 1,111,716
305,452
354,294
47,18782,442
68,242
17,840Research1$ 306,555
76,866
91,675
147,189
56,06355,497
31,203(39,494)$ 1,947,679

400,693$ 1,165,741

Student services
and support$ 140,842
52,67945,082
16,487
27,742
34,903
12,653
160,744
15,301$ 506,433

Institutional
support andauxiliary$ 517,552
143,129
153,648
199,366
150,669
52,055
121,759
8,325$ 1,346,503

Total$ 2,076,665
578,126
644,699
410,229
316,916
210,697
183,455
160,744384,825$ 4,966,356

1 The methodology used to allocate expenses for financial statement purposes is different than methodologies used for other purposes, such as

governmental surveys.

18. COMMITMENTS AND CONTINGENCIES
Lease commitments
The University is the lessee of equipment and space underoperating (rental) and finance leases. The University
determines whether a contract is a lease at inception.
Identified leases are subsequently measured, classified,and recognized at lease commencement. The University
categorizes leases with contractual terms longer thantwelve months as either operating or finance. The
University’s leases generally have terms that range from
one to five years for equipment and one to twenty years forproperty, with certain leases inclusive of renewal options

if they are considered to be reasonably assured at leasecommencement. Right of use assets and lease liabilities for
operating leases are included in “Operating leases — rightof use assets” and “Operating lease liabilities”, respectively,in the Consolidated Balance Sheets. Finance lease right ofuse assets and lease liabilities are included in “Fixed assets”
and “Deferred revenue and other liabilities”, respectively, in
the Consolidated Balance Sheets. Lease assets represent ourright to use an underlying asset for the lease term and leaseliabilities represent our obligation to make lease payments
arising from the lease.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

43

Operating and finance lease right of use assets andassociated lease liabilities are recognized based on thepresent value of future minimum lease payments to bemade over the expected lease term, using the collateralized
incremental borrowing rate at the commencement date indetermining the present value of future payments. Rent
expense related to operating leases, including short-termleases and variable lease payments, was $101.2 million and$95.4 million in fiscal year 2022 and 2021, respectively.
Maturity analysis of the annual undiscounted cash flows
reconciled to the carrying value of the operating and financelease liabilities (in thousands of dollars):
2023
2024
2025
2026
2027
Thereafter
TOTAL LEASE PAYMENTS
Less: Imputed Interest
PRESENT VALUE OF LEASE LIABILITIESOperating
Finance$ 84,515 $ 13,640
76,230
11,25569,951
11,64565,157
21,73460,518
11,696484,169
95,232
840,540
165,202(151,198)(77,004)$ 689,342 $ 88,198

Weighted-average remaining lease term and discount rate
for operating and finance leases were as follows:
June 30, 2022
Weighted Average Remaining Lease Term
Operating Leases
Finance Leases
Weighted Average Discount Rate
Operating Leases
Finance Leases

15.2 YEARS
14.4 YEARS
2.4%
2.4%

As of June 30, 2022, the University has $180.6 million of
future payments under a lease for research facilities andoffice space that have not yet commenced. This lease willcommence during fiscal year 2023 with a lease term of
15 years.

Fixed asset-related commitments
The University has various commitments for capitalprojects involving construction and renovation of certain
facilities, real estate acquisitions, and equipment purchases,
for which the outstanding commitments as of June 30, 2022
totaled approximately $267.2 million.

Environmental remediation
The University is subject to laws and regulations concerning
environmental remediation and has established reserves
for potential obligations that management considers to beprobable and for which reasonable estimates can be made.
These estimates may change substantially dependingon new information regarding the nature and extent ofcontamination, appropriate remediation technologies,
and regulatory approvals. Costs of future environmental
remediation have been discounted to their net present value.
Management is not aware of any existing conditions that it
believes are likely to have a material adverse effect on the
University’s financial position, changes in net assets, orcash flows.

GeneralThe University is a defendant in various legal actions
arising from the normal course of its operations. While
it is not possible to predict accurately or determine theeventual outcome of such actions, management believes
that the outcome of these proceedings will not havea material adverse effect on the University’s financial
position, changes in net assets, or cash flows.
The University has evaluated subsequent events throughOctober 12, 2022, the date the consolidated financial
statements were issued. The University has concluded thatno material events have occurred that are not accounted forin the accompanying consolidated financial statements ordisclosed in the accompanying notes.

The University leases properties to customers underagreements that are classified as operating or salestype leases. Property leased to others in operating leasearrangements are included in “Fixed assets” in theConsolidated Balance Sheets. Revenue is recognized to theextent that amounts are determined to be collectible.

HARVARD UNIVERSITY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

44

P R E S I D E N T A N D F E L LOW S

OFFICERSO F H A R VA R D CO L L E G E
L AW R E N C E S . B A CO W
L AW R E N C E S . B A CO W

President

President
PA U L J . F I N N E G A N
PA U L J . F I N N E G A N *Treasurer

Treasurer
AL AN M. GARBER
TIMOTHY R. BAR AKE T T

ProvostK E N N E T H I . C H E N A U LT*
M A R I A N O - F L O R E N T I N O ( T I N O)

MEREDITH WEENICKCUÉLL AR

Executive Vice President

B I D DY M A R T I N
K AREN GORDON MILL S*

PA U L A N D R E W

DIANA L . NEL SON

Vice President for Public Affairs
and Communications

T R A C Y PA L A N D J I A N
PENNY PRIT ZKER*
D AV I D M . R U B E N S T E I N
S H I R L E Y M . T I LG H M A N
T H E O D O R E V. W E L L S , J R .*B OA R D O F OV E R S E E R S

MARC GOODHE ART

Vice President and Secretaryof the University
M A N U E L C U E VA S -T R I S À N

Vice President for Human Resources

G E R A L D I N E A C U Ñ A -S U N S H I N E*
MONIC A BHAREL+R A P H A E L W. B O S T I C
MARK J. C ARNE Y*

THOMA S J. HOLLIS TER

Vice President for Finance andChief Financial Officer

ALICE HM CHEN
PA U L L . C H O I

BRIAN K . LEE

PHILIP HART CULLOM

Vice President for Alumni Affairs
and Development

S A N G U J . D E L L E+
JANE T ECHELMANC ARL A A . HARRISDIANE LOPEZ

M E R E D I T H (M A X ) H O D G E S

Vice President and General Counsel

M A R I LY N H O L I F I E L D
C H R I S T O P H E R B . H O WA R D
DARIENNE DRIVER HUDSON
VIVIAN HUNTT YLER JACK S*
JOHN B. KING JR.
R AY M O N D J . L O H I E R , J R .
S CO T T M E A D +K L A R A J E L I N KO VA

Vice President andChief Information Officer
TBA

Vice President for Campus Services

L AUREN ANCEL ME YERS+T O D D Y. PA R K+
MARGARET PURCE

MARTHA WHITEHE AD

Vice President for the Harvard Library

RESHMA SAUJANITHE A SEBA S TIAN
M E G A N R E D S H I R T-S H AW

+ N E W M E M B E R F O R 2 2 -2 3

V I K A S P. S U K H AT M E+

* JCI MEMBER

L E S L I E P. T O L B E R T
J AY S O N U. T O W E H
W I L H E M I N A W R I G H T+
SHERYL WUDUNNA S OF OC TOBER 2022