Financial
ReportFISCAL YEAR 2023

2

message from the president

3

financial overview

12

message from the chief executive
officer of harvard management company

harvard 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 present Harvard University’s Annual
Financial Report for fiscal year 2023.
This document is far more than an accounting of
our finances; it is a reflection of our commitment
to expanding access to education and knowledge, todriving discovery and innovation, and to fulfilling our
responsibility to a society that looks to Harvard forapproaches and answers — for hope that tomorrow will
be better than today.
Expanded financial aid — totaling $851 million —continues to remove barriers to academic and researchpursuits for all of our students. This year, we haveadjusted an important threshold for our Harvard
Financial Aid Initiative (HFAI). Undergraduates fromfamilies with annual incomes below $85,000 are fully
funded by the University — they pay nothing —andexpected contributions for families with annual
incomes between $85,000 and $150,000 max out at
ten percent of annual income. More than half of theindividuals studying at Harvard College today benefit
from our ongoing commitment to affordability, whichhelps to provide our institution with the excellence
it deserves and our society with the leaders it needs
and expects.
Creating opportunity is not limited to supporting
our own community. Axim Collaborative, a nonprofit created by Harvard and MIT, announced inJune a partnership with the United Negro College
Fund to develop a custom platform that will expand
digital learning capabilities across Historically Black
Colleges and Universities (HBCUs), and Harvard
Library is partnering with the HBCU Library Allianceto preserve and digitize African American history
collections across the country. At the same time,
we continue to share our tremendous collections
with the public, opening the doors of the Harvard
Art Museums to our neighbors throughout Greater
Boston and visitors from around the world with freeadmission for all.

harvard university  message from the president

We do these things with an eye on the horizon
and with the philanthropic support of alumni andfriends, seeking out new ways our mission can meetthe needs of our moment. The Kempner Instituteis welcoming its first wave of faculty and fellows as
artificial intelligence becomes a more central aspectof our work and lives, and the Salata Institute has
just announced its first cohort of grant recipients.
Fourteen climate change projects are being funded,and their diversity — from measuring the rising
sea to mapping tolls on mental health to outfittingbuildings with better materials — demonstrates not
only the complexity of the work before us but also
the possibility of making a difference across many
dimensions of our research and teaching.
I arrived at Mass Hall on July 1 thinking thatmy experience as dean of the Faculty of Arts andSciences had afforded me a wide perspective on the
University, but every day has given me an opportunity
to learn more about the ambition and courage of ourcommunity. As this handful of examples and thefollowing pages demonstrate, there is no end to what
we aspire to achieve together — no end to what we canachieve together.

Claudine Gay
president
September 2023

2

Financial Overview

From the Vice President for Finance and the Treasurer

This was a fiscal year marked by significant changes,
both within the University and across the broader
higher education landscape. Leadership transitions
marked major turning points within Harvard, withthe departures last year of President Larry Bacow,
Executive Vice President Katie Lapp and Vice President
for Finance and Chief Financial Officer Thomas
Hollister. Their farsighted leadership helped make
Harvard stronger, by every financial metric, than at
any point in its history. We are grateful to each of themfor their indelible and enduring contributions.
Outside of Harvard, fiscal year 2023 was characterized
by changes no less profound. Volatility in the capital
markets and rapidly rising interest rates — intended
to curb even more rampantly rising inflation — led tothree bank failures, among the largest in the country’s
history; climate change catalyzed record heat andaccelerating wildfires across the globe; the Supreme
Court challenged the way in which we conductadmissions in our efforts to ensure a diverse class; andthe potential of generative artificial intelligence, bothpropitious and perilous, erupted into the collective
consciousness. The impacts from each promise to
be profound.
Amidst this swirl of change, Harvard’s commitment
to excellence, opportunity, and impact remained
steadfast. The University generated an operating
surplus of $186 million or 3% of revenue, lower
than last year’s surplus of $406 million. This was
driven by purposeful investments in the mission andthe resurgence of expenses related to full campus
operations, as well as inflationary pressures. This
more modest operating margin is characteristic of the
University’s results prior to the pandemic.
Careful stewarding of resources over the past several
years made it possible to advance our pursuit ofacademic excellence, expand our commitment toopportunity and access, and initiate new programs toharvard university  financial overview

address society’s most vexing challenges. This year,
the University welcomed its inaugural cohort of PhDs
in quantum science, pioneers at the academic frontier.
Harvard College raised the income threshold forcost-free attendance to $85,000, allowing an estimated
25% of undergraduate students to attend for free. And
ongoing investments in initiatives, including Harvard
and the Legacy of Slavery and the launch of the Axim
Collaborative, call on Harvard to reckon with the past
while reimagining learning for the future.
These commitments to academic excellence andopportunity would not be possible without our donors,
past and present. Distributions from the endowment
totaled $2.2 billion or 37% of total revenue for theyear. An additional 8% of revenue came in the formof current gifts. Donors’ generosity allows Harvard toadvance mission-critical priorities. We are enormously
grateful for their steadfast support.
While we rightly celebrate these achievements, wemust acknowledge the financial challenges that lie inwait. On the heels of the most substantial interest rate
tightening cycles since the 1970s, the cost of capitalis anticipated to remain elevated, which may impact
future investment returns. The end of the era of
economic expansion, which we have written about inprevious letters, may be upon us.
Indeed, while we are deeply appreciative of the capablenavigation of complicated markets by CEO Narv
Narvekar and his colleagues at Harvard Management
Company, the 2.9% return on the endowment thisyear is below our long-term target return of 8%. Narv
expressed caution about forward-looking returns
in private portfolios last year, noting that “private
managers have not yet marked their portfolios toreflect general market conditions.” Accordingly, thisyear, the disparity between the public and private
markets continued, this time as private markets laggedon the upside.

3

We must be judicious in the way we access theendowment to support our operations, as it is nota checking account, but rather must be managed
to support both current and future generations ofstudents and scholars. Nevertheless, the endowment
distribution increased by 4.5% in fiscal year 2023 andis budgeted for the same level of growth for fiscal
year 2024. As stewards of the endowment, our focus
is on both supporting the University today, as well as
ensuring a consistent level of support in the future, atask that will be complicated by a potential low growtheconomic environment.
This backdrop is exacerbated by the reality that thecosts of running a world-class university — of ensuring
the resilience and accessibility of our buildings, ofeliminating greenhouse gas emissions from ourcampus footprint as we collectively address climatechange, of expanding access and affordability —continue to increase. Overall expenses rose 9% thisfiscal year, double the increase in revenue.
This is not sustainable. Our pace of spending cannot
continue unabated without a commensurate increase
in revenue. Yet as we have discussed in prior years’
letters, traditional sources of higher education revenue
face significant constraints. Looking forward, wemust respond prudently, by prioritizing activities
which most consequentially contribute to our mission,and by identifying and operationalizing ways to use
our financial, physical, and technological resources
more effectively.

In closing, we want to thank each and every donor
to the University — past and present — for making
Harvard’s excellence in teaching and researchpossible through your philanthropy. We want to thankHarvard’s faculty, students and staff for revitalizing
the campus following the pandemic, and for your vital
contributions, on a daily basis, in making Harvard oneof the world’s preeminent institutions. We also want toextend a warm welcome to Harvard’s 30th President,
Claudine Gay, along with the University’s new deans.
Together, we are committed to advancing academic
excellence and sustaining the farsighted stewardshipthat has been the gift of generations before us.

Ritu Kalra
vice president for finance

Timothy R. Barakett
treasurer
September 2023

Even with these challenges on the horizon, Harvard’s
finances remain strong. The University’s net assets,
a fundamental measure of our resources, increased
year-over-year. Schools and units continued tobuild reserves to help mitigate the impact of future
constraint and support new investments. Harvard
added only modest new debt in fiscal year 2023 andinvested over $500 million in renewing and improving
our physical plant.

harvard university  financial overview

4Harvard University’s stewardship of its financial resources is aimed at advancing teaching, learning,
and research 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 ourongoing dedication to public service, and transforming how problems are understood and addressed
through research. The key financial highlights for fiscal year 2023 included in this report demonstrate
the University’s continued commitment to advancing these priorities.
FINANCIAL OVERVIEWOPERATING REVENUESThe University ended fiscal year 2023 with anoperating surplus of $186 million compared to$406 million in fiscal year 2022, on an operating
revenue base that increased 5% or $262 million, to$6.1 billion. The reduced surplus was not unexpected
and was driven primarily by expenses associatedwith renewed return to campus activity and strategic
investments in our workforce, with increased
compensation for faculty and staff, a decrease invacancy rates, and overall growth in new workers
across campus.

The revenue profiles of Harvard’s many schools andunits vary widely, as each draws a different proportionof its budget from these primary sources as depictedin the following table:

FISCAL YEAR 2023 SOURCES OF OPERATING REVENUE
Endowment income made available for operations/endowment distribution

16%

12%

13%
10%

12%

6%
1%

9%

8%

4%

5%

5%

1%
6%

Education revenue

9%

8%
21%

15%

5%
8%

13%

Sponsored support

19%

Gifts for current use

3%
4%

12%

10%

Other

37%

33%

3%

17%

22%
21%

18%
43%

46%

37%

4%

38%

7%

61%

14%
22%
83%

28%

32%

4%

71%

40%
22%

11%
51%

12%
38%

37%

36%

35%
28%

University

Radcliffe

Divinity

Facultyof Arts &Sciences

harvard university  financial overview

DesignLaw

Engineering & Medical
AppliedSciences

27%

Kennedy
School24%

23%

Education

Dental20%

20%

Business

PublicHealth5

Harvard’s diversified activities rely on three main
sources of revenue: education or tuition, sponsoredresearch, and philanthropy, both past and present.
Total education revenue comprised 22% of revenue.
This includes tuition and board and lodging income,net of financial aid, from both traditional degree
seeking students (undergraduate, graduate, andprofessional), as well as executive and continuing
education learners. In support of research,
research our faculty
are awarded external grants by governmental andprivate partners to advance new academic knowledge;
this sponsored funding made up 17% of revenue.
Revenue generated each year from our education
program and research endeavors is not sufficient tofund operations and as such, the University relieson philanthropy to fill in the gap. In fiscal year 2023,
support from past and present donors provided 45%
of revenue through current use gifts and endowment
income, reflecting their generosity and belief in the
broad impact of education and research at Harvard.

OPERATING EXPENSES
The spending associated with Harvard’s diversified
activities also encompass three primary categories,
related to the faculty, staff and other people who make
Harvard’s work come alive; the classrooms, labs andother spaces in which their work is done; and the
supplies and services they use to advance the work.
FISCAL YEAR 2023 OPERATING EXPENSES

Supplies &Equipment
Services
Purchased
5%

Salaries &
Wages

13%
41%
Other

13%

People52%
7%3%Space &
Occupancy

7%11%Interest
Depreciation

Benefits

Space 17%

harvard university  financial overview

FISCAL YEAR 2023 OPERATING REVENUES

Research
17%

FederalSponsored

Non­Federal
Sponsored
DegreeSeeking
Education

Education
22%
Continuing &Executive
Education

11%

Current
Use Gifts

Philanthropy
45%

8%

6%

13%

37%

Net
Endowment
Distribution

9%

Other
16%

The University’s operating expenses increased by$482 million or 9% to $5.9 billion for fiscal year
2023. Spending rebounded in many areas across the
University, reflecting both increased campus activity
following the pandemic as well as the impact ofinflation, with increases in compensation and higher
discretionary spending (travel, food, supplies andequipment) leading the growth. Compensation, or
people, expenses (i.e., salaries, wages and benefits)peoplerepresented more than half of the University’s total
operating expenses in fiscal year 2023. Salaries andwages increased by 10% or $215 million, to $2.4
billion. This growth stemmed from wage increases, aswell as an investment in new faculty and staff across
campus. These new positions were the result of bothfilling open positions as well as targeted growth in
key initiatives. Employee benefit expense grew 8% or$44 million, in line with salaries and wages.
As pandemic restrictions continued to ease,
expenditures related to space as well as discretionary
costs both rebounded in fiscal year 2023. Universitywide space costs grew by 11% or $40 million, with theresumption of campus-based activity and an uptick indeferred maintenance projects. Other discretionary
spending returned to pre-pandemic levels, largely
driven by services purchased (+8% or $59 million) andtravel (+114% or $50 million).
6

BALANCE SHEETInvestments and endowment
The return on the endowment in fiscal year 2023 was
2.9%. Its value (after the impact of distributions fromthe endowment for operations, and the addition of
new gifts to the endowment during the year) stood
at $50.7 billion, down from $50.9 billion at the end of
fiscal year 2022. Additional information is available
in the Message from the CEO of Harvard Management
Company, found later in this report.
The University has a policy of maintaining liquidity
outside of the endowment for operating purposes.
These liquid, short-term investments totaled $1.4
billion at June 30, 2023 compared to $2.2 billion atJune 30, 2022 (see Note 2), well above our minimum
policy requirement.

Debt
Bonds and notes payable increased modestly from
$6.1 billion in fiscal year 2022 to $6.2 billion in fiscal
year 2023, driven by the issuance of $177 million incommercial paper. Issuances included $25 million
tax-exempt commercial paper for capital spending and$152 million taxable commercial paper to supplement
the University’s working capital. The University
maintained its AAA rating by S&P Global Ratings andAaa by Moody’s Investor Services.
Fixed assets
The University invested $512 million in capital for
fiscal year 2023 compared to $356 million in fiscal
year 2022. Despite the increase in capital expenditures,the construction market continued to experiencechallenges in fiscal year 2023 including supply chain
disruptions, equipment and construction labor
availability, and permitting delays, resulting in subdued
spending relative to the projects in the pipeline.

EDUCATION
In fiscal year 2023, across its 12 schools, Harvard
enrolled 25,266 students from around the globe,
including 7,178 undergraduates at Harvard College.

Total education revenue
Student income increased 9% or $108 million
to $1.3 billion in fiscal year 2023. Revenue fromtraditional student programs (undergraduate andgraduate) grew by 5% or $54 million. Board andlodging revenue of $221 million grew 11% as graduate
students continued to return to on-campus housing.
Executive and continuing education revenue totaled$544 million, growing 12% or $57 million. Financial
aid applied to student income increased 5% or$25 million to $531 million in fiscal year 2023.
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 for tuition, food and lodging. Since
launching the Harvard Financial Aid Initiative inharvard university  financial overview

2004, the College has awarded nearly $3.1 billion in
grant aid, and the undergraduate financial aid budget
has nearly tripled from $80 million in 2005 to $247
million in 2023. The average net cost of attendance for
all Harvard College students is $42,695.
Approximately 94% of dollars supporting student
financial aid at Harvard come from University sources,
including gifts, the endowment and unrestrictedfunds. The other 6% comes from the federal
government aid initiatives and other outside sponsors.
Harvard College has continued its ongoing efforts
to expand financial aid by raising the family income
threshold in 2023-2024 to $85,000 — a $10,000
increase from last year’s threshold. This changemeans that an estimated 25% of families do not haveto contribute anything to tuition, food or housing. In
addition, to ensure that students can participate fullyin the Harvard experience, Harvard augments thisaid by providing low-income students with fundingfor health insurance, emergency expenses, event
fees, and other activities. First-year students fromfamilies making under $85,000 also receive a $2,000
start-up grant.

7

INCREASING ACCESS TO HARVARD
Harvard University’s commitment to expanding accessto opportunities includes not only access to world-classlearning and research resources, but also ensuringthat we are a community where everyone has the
support to grow and succeed. Over the last year, we’ve
advanced this commitment in many ways, including
opening the doors wider to our museum collections
through free admission for everyone at the Harvard

Harvard College is committed to ensuring that
all admitted students have the opportunity toattend Harvard, regardless of the economic
obstacles they have encountered. Harvard
launched the Harvard Financial Aid
Initiative in 2004 to enhance this effort andto raise awareness of college affordability forstudents interested in all kinds of colleges anduniversities. The income threshold for cost-freeattendance rose to $85,000, an increase of$10,000 from the prior year.

As part of its ongoing efforts to ensure
the accessibility of its digital systems andcommunications, Harvard revised its Digital
Accessibility Policy so that all new digitalcontent designed and developed by Harvard
schools, units, and departments after June 1,
2023, should aim to be accessible to people
with disabilities. The University’s initial
Digital Accessibility Policy, which was put into
place in 2019, focused on expanding accessto Harvard’s knowledge, information, andlearning opportunities for audiences outside
the University. Improving the accessibilityof internally facing content and applications
is an important next step toward making
Harvard a more welcoming and inclusive
place for everyone.

harvard university  financial overview

Art Museums and expanding high-quality learning
opportunities that go beyond the traditional classroom
walls. The increased access is further supported withresources to strengthen intellectual, emotional andphysical wellbeing by, for example, expanding ourdigital accessibility policy and adding new student
mental health services and resources.

For students on tight budgets, a job interview
can bring the thrill of starting a new chapter
and the dread of locating work-appropriate
apparel. To meet this need, Travis Johnson ’24
and LyLena Estabine ’24, launched the Crimson
Career Closet (CCC), a brightly colored spaceon the 10th floor of the Smith Campus Center
where students preparing for job interviews
can borrow suits, dresses, and accessories
for free. Currently, the CCC has five racks ofclothes, mostly donated from faculty, andhopes to expand the donor base to alumni
and classmates with support from the Officeof Career Services.

Axim Collaborative, previously known as theCenter for Reimagining Learning, is a nonprofit
started by Harvard and MIT that aims to makelearning effective, accessible, and relevant to adiverse audience of learners and institutions.
In June, Axim Collaborative launched its
partnership with the United Negro College
Fund and Harvard to support the developmentof HBCUv, a platform that will provide digitallearning capabilities tailored to the specificneeds of HBCUs and the communities they
serve. HBCUv is intentionally designed toreplicate the learning culture and community
for which HBCUs are well known and aspires
to be a shared resource open to all HBCUs
and enable institutions to share knowledge,
resources, and best practices.

In June, the Harvard Art Museums
announced a new free admission policy
for all visitors. This represents a significant
expansion of free access to the museums’
collections, exhibitions, and research for
public audiences, and ensures that every
campus visitor will have the opportunity
to view and engage with the importantcollections in the Harvard Art Museums’ care.

Nearly 40 Allston-Brighton students ingrades 2-8 immersed in hands-on activities
this summer through the Harvard Ed Portal’s
Summer Explorations program. Now in
its seventh year, the program offers AllstonBrighton students free, weeklong courses
designed to keep them engaged in learning
during the school break. Among this year’s
highlights: students got a chemistry lesson by
rolling out, frying, and fermenting Ukrainian
flatbread ingredients in “Science of Cooking.”
Some learned about bones via “Ins and Outs
of Skeletons,” held at the Harvard Museum of
Natural History. Others took to the stage in“Creative Drama: Ocean Explorations,” led bystaff of the American Repertory Theater.

8

RESEARCH
Harvard scholars conduct research in almost every
field, seeking to expand human knowledge throughanalysis, innovation, and insight. In 2023, research
was supported by $1 billion of sponsored funds. In
addition, the University funded $416 million ofresearch through University funds, as submitted
in the 2022 National Science Foundation Higher
Education and Research Development (HERD) Survey.
Research is carried out both in the departments ofthe schools and at more than 100 research centers,
on campus and around the world. Researchers
include faculty members, visiting scholars, post­
doctoral fellows, and graduate and undergraduate
students, and they collaborate with colleagues acrossthe University, at affiliated institutions, and at otherresearch institutions.
During fiscal year 2023, the University saw continued
growth in research funding. In aggregate, revenue
from federal and non-federal sponsored sources
increased by 5% or $50 million. Federal funding,which accounted for approximately 66% of total
sponsored revenue in fiscal year 2023, increased 5% or$34 million to $676 million. This includes a one-time
grant from the Department of Homeland Security,
provided through the Massachusetts Emergency
Management Agency, for $25 million to reimburse theUniversity for Covid-19 related expenses incurred inprior fiscal years.
The University’s relationships with corporations,foundations and other non-federal sponsors expanded
in fiscal year 2023, resulting in a 5% or $16 million
increase in non-federal sponsored revenues, which
totaled $350 million. Non-federal funding continues
to be an area of growth, as researchers diversify theirresearch funding support. In addition, Harvard
devotes significant institutional resources to leveragethese federal and non-federal investments. This
funding provides crucial incubation to early-stage
research ideas before they are ready to be presented tosponsors for additional funding, seeds new initiatives,
subsidizes projects with insufficient external funding,and supports faculty to venture into new areas ofscientific inquiry.

harvard university  financial overview

REDESIGNING
HOW TO TEACH
CLIMATE CHANGE
In September 2022,
the Committee on
Climate Education
released “The Futureof Climate Education
at Harvard University,”
their analysis on how
Harvard as an academic
institution could meetthe challenges of climatechange. The report urges an all-hands-on-deck approachfor how Harvard teaches climate change, not only throughmore but also deeper instruction in disciplines that span
the University at a moment of heightened concern abouta changing world. The report outlines a series of concrete
steps, including hiring additional faculty and establishinga climate education accelerator to foster needed changes,
and envisions new courses in every discipline, increased
internship and fellowship opportunities, and assistance forfaculty in fields not traditionally linked to climate who want
to incorporate it in classes.

REMOVING CARBON USINGNEW ENGLAND’S FORESTSNew England’s Climate Imperative, a major report led
by a Harvard ecologist, suggests that with a handful ofstrategies, New England’s 32 million acres of forests,
which cover about three - quarters of the region, could
eventually come close to absorbing 100 percent of all the
carbon produced by the six states. The report lays out five
steps policymakers and conservation non-governmentalorganizations can pursue that can lead to forests absorbing
almost 360 million additional tons of carbon dioxideover 30 years. That means New England’s forests will beable to absorb virtually all the carbon produced in theregion, provided the six states hit their existing emissionreduction goals.

9PHILANTHROPY
Combining gifts for current use and Harvard’s
endowment distribution, philanthropy accounted for
45% of fiscal year 2023 revenue. To support the risingcost of sustaining excellence in teaching and research,
philanthropic support is increasingly important tocolleges and universities — and to keeping college
affordable. Excellence and affordability in higher
education today rely on philanthropy to support
nearly every aspect of university operations. Every gift
helps Harvard continue to be a leader for progress inthe world, enabling excellence in our teaching andresearch mission, recruiting and retaining our worldclass faculty, helping students thrive, and providing
greater access through financial aid.
PHILANTHROPY AS A PERCENTAGE OFTOTAL REVENUE OVER TIME
$7,000

campus activities, from faculty and fellow positions toscientific advancement.
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 it can responsibly draw, whilebalancing both current and future needs. Guided bythis principle of intergenerational equity, Harvard’s
endowment is carefully managed in order to ensurethat future generations will enjoy its benefits just as
much as the current one.
Cash gifts to the endowment were $561 million in
fiscal year 2023 compared to $584 million in fiscal
year 2022.

$6,000$5,000

MARKET VALUE OF THE ENDOWMENT AS OF JUNE 30, 2023

$4,000In millions of dollars$3,000$2,000$1,000
0

28%

35%

1995

2000

Total Revenue

37%
2005

42%
2010

45%

2015

46%

2020

45%

2023

Business$5,132

Other
Departs.
$4,516

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 toharvard university  financial overview

Law $2,481
Public Health $1,974

Medical$5,589Engineering & Applied
Sciences $1,827

Philanthropy

Gifts for current use
In fiscal year 2023, Harvard received current use
gifts from alumni, foundations, and others totaling$486 million, representing approximately 8% of
operating revenues. Support for the University comesfrom donations of all sizes; more than 75% of thenumber of gifts in fiscal year 2023 averaged $157
per donor.

President Funds $3,063

Faculty ofArts & Sciences$20,396

Kennedy School $1,552
Education $803
Radcliffe $792
Divinity $788
Design $650
Interfaculty initiatives $517
University professorship $407
Dental $262

TOTAL MARKET VALUE $50,749

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 sufficient
distribution, and the obligation both legally and to
our donors to maintain the long-term value of theendowment. There is a common misconception thatendowments, including Harvard’s, can be accessed
like bank accounts, used for anything at any time
as long as funds are available. In reality, Harvard’s
flexibility in spending from the endowment is limited10

inconsistent with an endowment’s fundamental
purpose of maintaining intergenerational equity. Asa 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. This critical source of funding distributed$2.2 billion in the fiscal year ending June 30,2023 — representing 37% of Harvard’s total operating
revenue — and is the single largest source of revenue
supporting the University.

by the conditions established by donors and by thefact that it is designed to last forever, which is crucial
for an institution intended to serve generations ofstudents and pursue new knowledge.
Harvard is obligated to preserve the purchasing powerof the endowment by spending only a sustainableportion of its value each year. Spending significantly
more than that over time, for whatever reason, would
privilege the present over the future in a manner

ENDOWMENT RETURNS MADE AVAILABLE FOR OPERATIONS BY YEAR
$2,400

30%

2,200

25%

2,000

20%

1,800

Endowment Return

15%

1,600

10%

1,400

5%

1,200

0%

1,000

­5%

800

­10%
­15%

600

­20%

400

­25%

200

­30%
Payout
Rate

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

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%

4.7%

Endowment Distribution

Endowment Distribution (in millions of dollars)

35%0Endowment Return

Endowment payout
While the endowment is a critical source of funding,
70% of the annual distribution from the endowment
is directed to specific programs, departments, or
purposes and must be spent in accordance with theterms set forth by the donor. Funds without donor
restriction are more flexible in nature, although areoften restricted at a high level such as to one school,
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 in from tuition and research
grants, and the critical costs associated with the
University’s teaching and research 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

11Harvard Management Company
Message from the Chief Executive Officer

For the most recent fiscal year, which ended onJune 30, 2023, the return on the Harvard endowment
was 2.9% and the value stood at $50.7 billion. The
endowment also made available more than $2.2 billion
for the University’s operating budget, supporting
financial aid, faculty, research initiatives, and more.

PERFORMANCE
Fiscal year 2023 (FY23) was a year of generally muted
returns for asset classes outside of public equities.
While public markets were flat or negative during thefirst half of FY23, the dramatic equity rally during
the second half of FY23 (i.e., the first six months ofcalendar year 2023) changed the picture meaningfully.

Index

FY22
Total
Return2022
July toDecember
Return2023
January
to JuneReturnFY23
Total
ReturnACWI-15.8%

2.3%

13.9%

16.5%

S&P 500-10.6%

2.3%

16.9%

19.6%

NASDAQ-23.4%

-4.7%

32.3%

26.1%

As noted in the asset allocation chart below, Harvard
Management Company (HMC) has limited longonly public equity exposure (11%) and, accordingly,
the endowment’s FY23 return does not reflect asignificant impact from public equity movements.
However, this portfolio construction also helps braceagainst significant swings in either direction, as it
did last year when the FY22 return (-1.8%) was notmeaningfully impacted by an overall double-digit
public equity decline.
Asset Class

Allocation

Public Equity
Private Equity
Hedge Funds
Real Estate
Natural Resources
Bonds/TIPS
Other Real Assets
Cash and OtherENDOWMENT

harvard university  harvard management company

11%
39%
31%
5%
1%
6%
2%
5%
100%

Strong public equity returns are often outpaced byprivate equity and venture capital. However, thereturns for these asset classes proved to be only
slightly positive in private equity and mildly negativein venture capital/growth. While this outcome may
seem counterintuitive, we anticipated a correction in
those funds’ performance in last year’s annual letter,noting that their dramatic outperformance over publicmarkets was likely due to a natural lag in how theirassets are valued.
Put another way, in FY22 private managers did not
reduce the value of their investments in a mannerconsistent with declining public equity markets.
Accordingly, those private asset managers did not
subsequently increase the value of their investmentsin the context of rising public equity markets in
FY23. Given the continued slowdown in exits andfinancing rounds over the last year, it will likely takemore time for private valuations to fully reflect current
market conditions.

REFLECTIONS ON SIX FISCAL YEARS AT HMC
In FY21, HMC reported on the completion of our fiveyear restructuring of both the organization and theendowment portfolio one year ahead of schedule. We
noted at the time that the swift, broad restructuringof HMC’s operations and investment model allowed
us to focus substantially all our time on the portfolio
turnaround, which is now largely complete. We are
fortunate to have maintained a 9.2% annualized
return during that span.
There are three main components to endowment
performance: risk level, asset allocation, and manager
selection. We are particularly gratified by the second
and third components outlined immediately below.

12

HMC’s manager selection alpha is one of our proudest
achievements. Over the course of the last six fiscal
years, the alpha generated by HMC’s manager
selection has been very strong, greater than we would
have anticipated. Although we are confident that HMC
will continue to do very well, it is hard to imagine thatthe next six years of alpha production can be as strongas the previous six years.
Our approach to overall asset allocation is based on
portfolio risk level. Accordingly, and as discussed ingreater detail below, Harvard engaged in a deliberate
process to analyze its risk tolerance. However,even before changing risk levels, HMC worked to
optimize its asset allocation within the University’s
existing risk constraints. We moved swiftly in a riskneutral manner to pivot from private real estate andagriculture/timber to private equities early during thisperiod. We also built a portfolio of liquid uncorrelated
funds within our overall hedge fund allocation.
These decisions proved to be successful. Within theasset classes, we also diversified into biotech (bothpublic and private markets) and significantly added totech venture.
Looking back over many years, a main constraint
on Harvard’s endowment returns has been that theportfolio was structured to take less risk than what
was likely prudent. The question of the amount ofrisk to take is not a simple one, as it must weigh, forexample, budget stability against long-term growthin the endowment. HMC built an analytical risk
framework and partnered closely with the University
to help determine the University’s risk tolerance. Afterseveral years of rigorous conversation and analysis,
the University agreed to a measured increase in theportfolio’s risk level, which HMC began implementing
over the last two years.
While we are very pleased to have catalyzed thiscritical discussion and process, we note that we
continue to operate, even after the risk increase,at a somewhat lower risk level than many peer
endowments. Going forward, HMC will continue towork with the University to periodically review theappropriate long-term risk level and tolerance (similar
to how many endowments periodically review theirharvard university  harvard management company

asset allocations with their investment committees
and university constituents).
Ultimately, we believe that the measured increasein risk — carefully calibrated to ensure long-term
endowment stability — and the improved asset
allocation (versus when we started, six years ago)
will continue to generate strong returns even if the
manager selection alpha attenuates.
I would also like to highlight that HMC has started
investing in innovation related to mitigating
greenhouse gas emissions. While we have been early
in investing in this area over the last few years, we
believe that a decade from now it will be accretive toendowment performance. Innovation to reduce carbon
emissions will be rewarded, as it is one of the mostobvious needs in society today.
In addition to organizational structure and portfolio
shifts, there were two other specific initiatives that weare proud to have incorporated into our operations:addressing gender and racial diversity in the financial
industry and expanding our sustainable investing
practices to meet the University’s pledge to have theendowment net zero of greenhouse gas emissions
by 2050.
HMC’s focus on diversity looks at our own team, theleadership of our asset managers, and the companies
in which those managers choose to invest. We aim
to seek talent from the broadest possible pool ofcandidates and managers. In addition to actively
seeking out more diverse managers for investment
consideration, we collect data, where available, on
the diversity of the managers’ leadership, staff, andportfolio investments. The financial industry has along way to go on this front, but we hope these steps
can play a small role in addressing this challenge.
Nearly a decade ago, Harvard became the first
U.S. higher education endowment to sign onto
the U.N.-supported Principles for Responsible
Investment. Along with that commitment, HMC
formalized its Sustainable Investing Policy to ensurethat we considered all environmental, social, andgovernance factors that could impact the value of our13

investments. More recently, Harvard became the first
U.S. university to commit to making its endowment
portfolio net zero of greenhouse gases by 2050 — inline with the timeline of the Paris Agreement. In
addition to the groundbreaking work that entails, ourown operations were net zero of carbon emissions forthe second consecutive year. Doing so has not only
allowed us to hold ourselves to the same standards
we are asking of others, but also is in line with
Harvard University’s climate commitments. Ourannual Climate Report will go into greater detail on
the variety of efforts associated with our sustainable
investing initiatives and progress toward the net
zero pledge.

I am proud of our team’s ability to adapt to thisnew structure and to proactively engage with newchallenges. And we have done so while always
keeping Harvard’s mission front of mind, ensuringthat the University has the financial resources toachieve academic excellence, expand opportunities forstudents and faculty, and foster diverse educational
experiences. I am excited to see what we willaccomplish together in the years ahead.
Best Regards,

N.P. “Narv” Narvekar
chief executive officer
September 2023

harvard university  harvard management company

14

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 andits subsidiaries (the "University"), which comprise the consolidated balance sheet as of June 30,
2023, and the related consolidated statements of changes in net assets with general operating
account detail and of changes in net assets of the endowment for the year ended June 30, 2023
and of cash flows for the years ended June 30, 2023 and 2022, 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, 2023, the changes in its net assets
for the year ended June 30, 2023 and its cash flows for the years ended June 30, 2023 and 2022
in accordance with accounting 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 UnitedStates of America (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 ethicalresponsibilities, in accordance with the relevant ethical requirements relating to our audit. We
believe that the audit evidence we have obtained 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, 2022, and the related
consolidated statements of changes in net assets with general operating account detail, of changes
in net assets of the endowment and of cash flows for the year then ended (the balance sheet andthe statements of changes in net assets with general operating account detail and of changes in
net assets of the endowment are not presented herein), and in our report dated October 12, 2022,
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,
2022 and for the year then ended is consistent, in all material 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 ofAmerica, and for the design, implementation, and maintenance of internal control relevant to the
preparation and fair 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 are conditions 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 are issued.

PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Boston, Massachusetts 02210
T: (617) 530 5000, www.pwc.com/us

harvard university  report of independent auditors

15

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 ofAmerica, and for the design, implementation, and maintenance of internal control relevant to the
preparation and fair 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 are conditions 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 are issued.
Auditors'
Responsibilities
for the Auditof theConsolidated
Financial Statements
Our objectives
are to obtain reasonableassurance
about
whether the consolidated
financialstatements as a whole are free from material misstatement, whether due to fraud or error, and to
arereport
to obtain
assurance
whetherthe consolidated
Ourissueobjectives
an auditors'
thatreasonable
includes ouropinion.about
Reasonableassurance
is a high financial
level ofstatements
as aiswhole
are freeassurance
from material
misstatement,
due thatto fraud
or error,and toassurance but
not absoluteand therefore
is not whether
a guarantee
an audit
conducted
issue
an auditors'
that
includesouropinion.
Reasonableassurance
is a highlevelTheof risk ofPricewaterhouseCoopers
101
SeaportBoulevard,
Massachusetts
02210
in accordancewithreport
US LLP,
GAAS
will
alwaysdetecta Boston,material
misstatement
when
it exists.
assurancenotabsolute
assuranceresulting
and therefore
is notisa higher
guarantee
conducted
T:
530but5000,
www.pwc.com/us
not(617)detectingaismaterial
misstatementfrom fraud
thanthatfor anoneauditresultingfrominaccordance
with
US
GAAS
will
alwaysdetectamaterial
misstatement
when
itexists.
Theerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,orriskthe ofnotdetectinga material
misstatement
resultingfrom fraudmaterial
is higherifthan
forresulting fromoverrideof internal
control.
Misstatements
are considered
there
is onea substantial
error,
as fraud
involve collusion,forgery, intentionalomissions,likelihood
that,mayindividuallyor in the aggregate,
they would
influencemisrepresentations,the judgment made orby theaoverrideof internal
control.
are consideredmaterial if there is a substantial
reasonable
user basedon theMisstatements
consolidated financial
statements.
likelihood that, individually or in the aggregate, they would influence the judgment made by areasonable
useranbased
consolidated
In performing
auditonin theaccordancewith financial
US GAAS,statements.
we:
In performing
anprofessional
audit in accordance
with
GAAS, we:• Exercise
judgmentandUS
maintainprofessional skepticism throughout theaudit.
•• Exercise
professionaland maintainprofessional
skepticism
throughout
Identify andassess thejudgment
risks of material
misstatementof theconsolidated
financialthe
audit.
statements, whether due to fraud or error, and design and perform audit procedures• Identify
andtoassessrisks
of material
misstatementof the consolidated
financialresponsive
those therisks.
Such
procedures
include examining,
on a test basis,
evidencestatements,
whetherdue
to disclosures
fraud or error,
andconsolidated
design and perform
procedures
regarding theamounts
andin thefinancialaudit
statements.
to those risks. ofSuchprocedures
examining,
on a testaudit
basis,inevidence• responsive
Obtain an understanding
internal
controlinclude
relevant
to the University
order toregardingtheamounts
anddisclosuresintheconsolidated
financialstatements.
design audit procedures that are appropriate in the circumstances, but not for the• purpose
Obtain anof internal
relevant toaudit
in ordertoofunderstanding
expressing an opinion
on control
the effectiveness
ofthe
theUniversity
University's
internal
control.
designaudit proceduresthat areappropriate in the circumstances, but not for the
Accordingly,
no such opinion
is expressed.
expressing
an opinion
on the effectivenessof theinternal ofcontrol.
• purpose
Evaluateof
theappropriatenessof accounting
policies used
andUniversity's
the reasonablenessAccordingly,
no such opinion
is expressed.
significant accounting
estimates
made by management, as well as evaluate the overall• Evaluate
the appropriatenessof accounting
policies used and the reasonableness ofpresentationof the consolidated
financial statements.
significant
accounting
estimates
madebymanagement,
as evaluate
the overall• Conclude whether, in our judgment, there are conditionsasorwell
events,consideredin thepresentationof raisethe consolidated
financialstatements.
aggregate, that
substantial doubt
about
the University's ability to continue as a
• Conclude
whether,
our judgment,
are conditions or events, considered in thegoing concern
for a inreasonable
periodthereof time.
aggregate, that raise substantial doubt about the University's ability to continue as agoing concern
for a reasonable
periodof time.
We are required
to communicate
with thosechargedwith governance regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, and certain internalWe
are requiredmattersto communicate
with thosechargedcontrol-related
that we identified
duringthe with
audit.governance regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, and certain internal
control-related
matters that we identified during the audit.
Other Information
Other
Information
Management
is responsible for the other information included in the annual report. The otherinformation comprises the Harvard University Financial Report Fiscal Year 2023, but does not
Management
is responsible
for thestatements
other information
the annual
report.
The otherinclude the consolidated
financialand our included
auditors'in
reportthereon.
Our opinion
on
information
comprises
thestatements
Harvard University
Financial
ReportFiscal Year and
2023,
not
the consolidated
financialdoes not cover
the other
information,
webut
do does
not express
includethe orconsolidated
statements
an opinion
any form offinancial
assurance
thereon. and our auditors' report thereon. Our opinion on
the consolidated financial statements does not cover the other information, and we do not express
anopinion or anyof assurance
thereon.
In connection
withform
our auditof the consolidated
financial statements, our responsibility is to readthe other information and consider whether a material inconsistency exists between the otherIn
connection
withaudit of thefinancial
consolidated
financialstatements,
our responsibility
is appears
to readinformation
andtheourconsolidated
statementsor theother information
otherwisetheotherinformation
andconsiderwhetheramaterialinconsistency
existsbetweentheother
to be materially misstated. If, based on the work performed, we conclude that an uncorrected
informationand the consolidated
statementsor theinformation
otherwisematerial misstatementof the otherfinancial
information
exists, weareotherrequired
to describe
it in ourappears
report.
to be materially misstated. If, based on the work performed, we conclude that an uncorrectedmaterial misstatement of the other information exists, we are required to describe it in our report.
Boston, Massachusetts
October 18, 2023
Boston, Massachusetts
October 18, 2023
2
2
harvard university  report of independent auditors

16

CONSOLIDATED BALANCE SHEETS
with summarized financial information as of June 30, 2022

June 30
2023

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)
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$ 6,640,552
9,229,293$ 3,496,156
41,519,301
634,217$ 45,649,674$ 15,869,845

2022

245,589349,271362,676
715,444
400,401
2,699,634
8,595,983
438,892
122,758
59,078,919$ 73,009,567

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$$

416,881
1,747,823
754,195
629,995
886,2226,214,734
840,198
11,490,048$

486,707
1,708,821
689,342718,031
886,017
6,117,203
928,514
11,534,635

61,519,519

61,246,694$ 73,009,567$ 72,781,329

June 302023$ 10,136,708
50,748,594
634,217$ 61,519,519

2022$ 9,668,474
50,877,680
700,540$ 61,246,694

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, 2022
In thousands of dollars
OPERATING REVENUE:
Net student income (Notes 2 and 12)

Without Donor
Restrictions$

With Donor
Restrictions

For the year ended
June 302023
2022

1,331,557$ 1,331,557$ 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

491,878
184,257
93,06927,014
796,218

204,777
24,667229,444491,878
184,257
297,846
51,681
1,025,662

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

Gifts for current use (Note 14)

149,759

336,123

485,882504,736

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

420,219
173,279
38,734
632,232

1,824,480
4,571
1,829,051

2,244,699
173,279
43,3052,461,283

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

Other revenue (Note 15)
Net assets released from restriction

792,916
2,305,695(2,305,695)

792,9160

838,323
0

TOTAL OPERATING REVENUE

6,008,377

88,923

6,097,300

5,835,791

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

2,421,076
628,304
791,941
424,809394,079
283,323
208,590
181,295
578,380
5,911,797

02,421,076
628,304
791,941
424,809394,079
283,323
208,590
181,295
578,380
5,911,797

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

96,58088,923

185,503405,658

24,769146,519(173,279)
286,022(2,125)96,17570,1587,743(201,649)
28,398
0282,731

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

NET OPERATING SURPLUS
NON-OPERATING ACTIVITIES:
Income from GOA Investments
GOA realized and change in unrealized appreciation/(depreciation), 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

24,769146,519(173,279)
286,022(2,125)96,17570,158
7,743(194,430)
142,634
24,114
120,694
171,324
292,018
15,577,827$ 15,869,845(7,219)28,398(142,634)
258,617347,540468,234
232,483(300,410)(129,086)(2,288,073)(66,323)(66,323)(72,790)(19,193)272,825(2,128,380)
45,668,867
61,246,694
63,375,074$ 45,649,674 $ 61,519,519 $ 61,246,694

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, 2022

In thousands of dollars
Investment return (Note 3):
Income from general investments
Realized and change in unrealized appreciation/(depreciation), 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$

34,240214,972
249,212(420,219)(171,007)$

102,839
194,430

457,768
7,219
50,747(179,700)
8,121
141,714(50,235)(300,410)
41,819,711$ 41,519,301(5,173)50,235
171,324
9,057,969$ 9,229,293

For the year ended
June 30
2023
2022

With Donor
Restrictions
149,482
938,954
1,088,436(1,824,480)(736,044)$

183,722
1,153,926
1,337,648(2,244,699)(907,051)

560,607
201,649
50,747(179,700)
8,121
136,5410(129,086)
50,877,680$ 50,748,594$

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

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

harvard university  consolidated financial statements

19

CONSOLIDATED STATEMENTS OF CASH FLOWS
with summarized financial information for the year ended June 30, 2022

For the year ended
June 30

In thousands of dollars

2023

2022

272,825$ (2,128,380)

424,809(37,179)(1,336,740)(4,985)(5,996)42,175(64,469)
16,437(504,714)
409
8,923(88,316)(38,297)428,860(35,865)
1,511,867(22,704)
82,861(101,062)(81,017)
15,069(556,994)
343
23,439(150,133)
12,815(9,479)(45,228)(107,200)(82,631)
43,77064,853(1,451,033)(17,310)(2,276)(256,476)(6,807)(36,662)(13,530)(1,333,962)(62,985)
42,902494
8,689,761(7,988,945)
599,085(578,365)
701,947(64,584)
48,654
12,714
15,503,537(14,028,307)(699,810)(426,773)
345,431

4,295(41,970)
177,296(42,995)
48,032504,714(4,768)644,604(740)(32,278)746,530(97,004)
65,948556,994(6,350)1,233,100

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

(104,482)
1,808,872$ 1,704,390

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

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

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 (appreciation)/depreciation, 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 ACTIVITIES$CASH 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 ACTIVITIESSupplemental disclosure of cash flow information:
Accounts payable related to fixed asset additions
Cash paid for interest
New operating leases – right of use assets

245,589
1,458,801$ 1,704,390

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

$
$
$

$
$
$

54,092
235,881
150,680

45,583
222,932
66,537

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

harvard university  consolidated financial statements20

1. UNIVERSITY ORGANIZATION
Harvard University (the “University”) is a private, not-for­profit institution of higher education with approximately
7,200 undergraduate and 14,200 graduate students infiscal year 2023, as compared to 7,100 undergraduate and14,100 graduate students in fiscal year 2022. 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, 2022, 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 82% of the

University’s net assets without donor-imposed restrictions
as of June 30, 2023. 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 statements21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,
2023
FINANCIAL ASSETS
Cash and cash equivalents
Receivables, net
Pledge receivables due in one year
Cash 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 LIQUIDITY RESOURCES AVAILABLE WITHIN ONE YEAR$

245,589349,271459,286
1,418,472
2,649,533

2022$

283,227
339,792
376,097
2,236,157
2,460,142$ 5,122,151$ 5,695,415

1,500,000
975,000
1,847,704

1,500,000
1,000,000
2,000,000$ 9,444,855$ 10,195,415

1 The University has a policy of maintaining liquidity outside of the General Investment Accounting (GIA) through a combination of cash equivalents and short-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 was $9.2 billion and$9.1 billion in endowment funds without donor restrictions
at June 30, 2023 and 2022, respectively, and $5.6 billion
and $4.7 billion of General Operating Account investments(GOA) at June 30, 2023 and 2022, 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 $208.3 million
and $209.1 million at June 30, 2023 and 2022, respectively,
which are primarily recognized in the subsequent fiscal year.
Total student income of $1.3 billion and $1.2 billion wasrecorded during the years ended June 30, 2023 and 2022,
respectively. Student tuition, fees, board and lodging at
published rates is summarized as follows for the years
ended June 30, 2023 and 2022 (in thousands of dollars):
Undergraduate program
Graduate and professional degree programsContinuing education and executive programs
Board and lodging

2023$ 409,890
687,136544,039
221,2352022$ 390,809
652,005
486,682
199,771

Scholarships applied to student charges were $530,743 and $505,904 for theyears ended June 20, 2023 and 2022, 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 $1.0 billion includes support fromgovernmental 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 $84.7 million and $64.3 million
as of June 30, 2023 and 2022, respectively. As of June 30,
2023, the University also had $1.6 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 $792.9 million in fiscal 2023 and$838.3 million in fiscal 2022 includes several revenue
streams considered exchange contracts with customers
totaling $651.5 million for fiscal year 2023 and $726.9
million in fiscal year 2022. These revenues are recognizedat the point in time goods or services are provided. Deferred
revenues related to other revenue of $96.5 million and$104.7 million were recorded as of June 30, 2023 and2022, which are primarily recognized in the subsequentfiscal 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 reservefor incurred claims, including those related to Harvard
Medical School activities not occurring in the affiliatedteaching hospitals. CRICO provides malpractice coveragewith 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 maintains an insured dental
plan, and 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 that have been incurred but
not reported, and are included in operating 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 in several
ways, including the addition of excise taxes on executive
compensation and net investment income, as well as newrules for calculating unrelated business taxable income. The
University records an estimate for related tax expense basedon currently available regulatory guidance of the Act andcontinues to evaluate the impact of the Act on current andfuture 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, 2022, the University adopted ASU 2021-05,
Leases (Topic 842): Lessors — Certain Leases with Variable
Lease Payments, which amends the lease classification
requirements for lessors with certain leases containing
variable payments. A lessor is to classify and account for alease with variable lease payments that do not depend on anindex or a rate as an operating lease if the lease would havebeen classified as a sales-type lease or a direct financing
lease and the lessor would have otherwise recognized a dayone loss. The University adopted ASU 2021-05 prospectively.
This guidance did not have a significant impact on the
University’s consolidated financial statements.
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 ofadopting this amendment are addressed in Note 11.

In September 2022, the FASB issued ASU 2022-04,
Disclosure of Supplier Finance Program Obligations. Under
ASU 2022-04, the buyer in a supplier finance program isrequired to disclose information about the key terms of the
program, outstanding confirmed amounts as of the endof the period, a rollforward of such amounts during eachannual period, and a description of where in the financial
statements outstanding amounts are presented. With the
exception of the disclosure of rollforward information, the
ASU is effective for fiscal year 2024 for the University. The
rollforward requirement is effective for fiscal year 2025 for
the University. The University is currently evaluating theimpact of the new guidance on the consolidated financial
statements, but does not believe the adoption will impact
the consolidated financial statements going forward.
In March 2020, the FASB issued ASU 2020-04, Reference
Rate Reform (Topic 848): Facilitation of the Effects ofReference Rate Reform on Financial Reporting, and in
January 2021 issued ASU 2021-01, Reference Rate Reform(Topic 848): Scope. These ASUs provide temporary optional
expedients and exceptions to existing guidance on contract
modifications and hedge accounting to facilitate themarket transition from existing reference rates, such as
London Interbank Offered Rate (“LIBOR”) which has beenphased out, to alternate reference rates, such as Secured
Overnight Financing Rate (“SOFR”). These standards are
effective upon issuance through December 31, 2022. The
adoption of this standard has not had a material impact
on the University’s consolidated financial statements
and disclosures. In December 2022, the FASB issued
ASU 2022-06, Reference Rate Reform (Topic 848): Deferralof the Sunset Date of Topic 848, which defers the sunset dateof reference rate reform relief to December 31, 2024.
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments — Credit Losses (Topic 326): Measurement ofCredit Losses on Financial Instruments. ASU 2016-13 replaced
the incurred loss methodology with an expected loss
methodology that is referred to as the current expected credit
loss (“CECL”) methodology. CECL requires an estimate ofcredit losses for the remaining estimated life of the financial
asset using historical experience, current conditions, andreasonable and supportable forecasts and generally applies
to financial assets measured at amortized cost, including
loan receivables and held-to-maturity debt securities, andsome off-balance sheet credit exposures such as unfunded
commitments to extend credit. Financial assets measured atamortized cost must be presented at the net amount expected
to be collected by using an allowance for credit losses. This
guidance is effective for fiscal year 2024 for the University.
The University is currently evaluating the impact of the new
guidance on the consolidated financial statements.

harvard university  notes to consolidated financial statements24

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, 2023 and 2022 are summarized in the following table (in thousandsof dollars):
2023

2022

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$ 56,633,201
2,445,718
59,078,919
122,758
59,201,677$ 55,938,831
3,196,388
59,135,219
179,51459,314,733

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

626,3713,624
629,995$ 58,571,682

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

As of June 30, 2023 and 2022, 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

2023

2022

$ 48,679,919
5,577,019
863,185
1,009,465$ 56,129,588$ 48,798,038
4,658,269
934,971
1,017,645$ 55,408,923

1,784,840
657,254$ 2,442,094$ 58,571,682

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

1 As of June 30, 2023, the total net assets of the endowment of $50,748,594 is comprised of investments in the GIA of $48,679,919, pledges of $1,253,486,

interests in trusts held by others of $411,747, and $403,442 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 $1,427,153 and $2,238,277 as ofJune 30, 2023 and 2022, respectively.

harvard university  notes to consolidated financial statements

25

Investment return
A summary of the University’s total return on investments for fiscal years 2023 and 2022 is presented below (in thousandsof dollars):
Return on pooled general investment account:
Realized and change in unrealized appreciation/(depreciation), net
Interest, dividend, fees, and expenses, net
Total return on pooled general investment account1
Return on other investments:
Realized and change in unrealized appreciation/(depreciation), 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

2023

2022

$ 1,320,925
211,887
1,532,812$ (1,223,200)
150,734(1,072,466)

15,81559,722$75,537
3,929$ 1,612,278(288,667)
36,225$ (252,442)
19,169$ (1,305,739)

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
that are 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

26

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, 2023 and summarized as of June 30, 2022 (in thousands of dollars):
2023

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

$ 1,458,801$

150,789

1,532,888
290,381
1,984,636
15,83929,932
13,863

Other investment liabilities not subject
to fair value
TOTAL INVESTMENT LIABILITIES 3
Liabilities due under split interest agreements4
NON-INVESTMENT LIABILITIES SUBJECTTO FAIR VALUE LEVELINGTOTAL LIABILITIES$ 1,856,474
786,461
1,211,417
1,057,153

10,065

3,093,108$ 290,011
1,157,032

979
7,170

17,267,674
21,966,842
428,260
2,996,167

1,077,269$ 6,404,588$

89,20982,826

4,645

332,889$ 1,458,858

438,892

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

Level 362022
NAV asPractical
Expedient$ 438,892

$

4,142

$

14,073$ 50,663,556

Total

Total

$ 1,458,801
150,789
3,389,362
1,076,842
1,211,417
3,051,854
15,8393,123,040
303,874
17,267,674
23,123,874
429,239
3,003,337
1,077,269
93,854
82,826$ 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$ 58,859,891
341,786$ 59,201,677
438,892$ 58,761,694
553,039$ 59,314,733
432,896$ 438,892$ 59,640,569$ 432,896$ 59,747,629$

18,215
138,733$

77,081
154,949$

156,948$

232,030$

473,047
629,995
886,222$

486,001
718,031
886,017$ 138,733
$

4,142

$

14,073$886,222$886,222$ 138,733$ 886,222$ 1,516,217$ 886,017$ 1,604,048

1 This excludes money markets held in “Cash and cash equivalents” on the Consolidated Balance Sheets of $55.0 million and $65.0 million as of June 30,2023

and 2022, respectively, which are Level 1 investments.

2 As of June 30, 2023 and 2022 other assets not subject to fair value consists primarily of receivables for transactions that settled subsequent to the balance sheet

date of $239,815 and $480,949, respectively.

3 As of June 30, 2023 and 2022, total investment assets, net equal $58,571,682 and $58,596,702, 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 $3,624 and $8,609 as of June 30, 2023 and 2022, respectively.
6 As of June 30, 2023 $549,555 of Level 3 assets were valued using significant unobservable inputs.

harvard university  notes to consolidated financial statements

27

The following is a rollforward of Level 3 investments for the year ended June 30, 2023 and the condensed June 30, 2022
rollforward of Level 3 investments (in thousands of dollars).
Net
realized
gains/(losses)

Beginningbalance as ofJuly 1, 2022
INVESTMENT ASSETS:
High yield
Private equity
Real estate
Due from brokers
INVESTMENT ASSETS SUBJECTTO FAIR VALUE LEVELINGInterests in trusts held by others
NON-INVESTMENT ASSETSSUBJECT TO FAIR VALUELEVELING$

298,319
1,174,625
25,0744,640$ 1,502,658
432,896
$
$

$

1,428
51,473(28,822)$ 24,079

432,896

TOTAL ASSETS SUBJECT TO
FAIR VALUE LEVELING$ 1,935,554

INVESTMENT LIABILITIES:Other liabilities subject to fair value$

154,949

TOTAL LIABILITIES SUBJECTTO FAIR VALUE LEVELING$

154,949

NET ASSETS SUBJECT TO
FAIR VALUE LEVELING$ 1,780,605

Net change
in unrealized(depreciation)/
appreciation1$$

0$ 24,079

Sales/
distributions(9,346)(58,833)
11,6225$ 423,970
94,293$$ (56,552)
8,008$ 518,263$(529,490)(2,012)$(2,012)$$ 24,079

Purchases/
contributions

8,008(424,360)(104,426)(704)

Transfers outof Level 32

Endingbalance as ofJune 30, 2023
$

$

(100)

$

(100)

$ 1,458,858$
438,892$$

438,892$ (48,544)$ 518,263$(531,502)$364$ (98,916)$

82,336$

138,733$364$ (98,916)$

82,336$

138,733$ (48,908)$ 617,179$(613,838)

$

(100)

290,011
1,157,032
7,170
4,645

(100)

$ 1,897,750$ 1,759,017

1 Total change in unrealized (depreciation)/appreciation relating to Level 3 investment assets and investment liabilities still held by the University at June 30, 2023

is $35,939 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.

PRIOR YEAR NET ASSETS SUBJECTTO FAIR VALUE LEVELING

Beginningbalance as ofJuly 1, 2021

Net
realized
gains/(losses)$ 2,560,200$ 18,622

Net change
in unrealized(depreciation)/
appreciation1$(1,086)

Purchases/
contributions

Sales/
distributions

Transfers outof Level 32

Endingbalance as ofJune 30, 2022

$ 631,136$ (1,284,805)$ (143,462)$ 1,780,605

1 Total change in unrealized (depreciation)/appreciation 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.

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, 2023, 15% 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
investments held for working capital purposes withharvard university  notes to consolidated financial statements

28

original 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 amount of
the agreement, including interest where applicable. At June30, 2023 and 2022 the University had gross asset repurchaseagreements of $0.2 billion and $0.8 billion which were fully
collateralized. The University does not offset repurchaseagreements that are subject to master netting 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

29

The following table presents information about the University’s derivatives by primary risk exposure for the years ended
June 30, 2023 and 2022 (in thousands of dollars):

Primary risk exposure
Equity instruments
Fixed income instruments1
Currency instruments
Credit instruments
SUBTOTALAs of June 30, 2023
Average
Gross
Gross
Quarterly
derivative
derivative
Notional
assetsliabilities$ 2,328,894$ 115,648$ 41,180
117,000
3,624
18,875
1,121
1,123
4,800
4,797
$ 121,566$ 45,927

For theyear ended
June 30, 2023

As of June 30, 2022
Average
Gross
Gross
Net profit/
Quarterly
derivative
derivative(loss)4
Notional
assetsliabilities$ 131,794 $ 5,009,087$ 79,784$ 130,849
3,929
117,000
8,609(1,792)
6,867
1,628
1,626
132
4,752
4,777
$ 134,063$ 86,189$ 141,084

TOTAL COUNTERPARTY
NETTING 2(27,712)(27,712)(68,643)(68,643)

NET AMOUNTS INCLUDEDIN THE CONSOLIDATEDBALANCE SHEETS 3

93,854

18,215

17,54672,441

Collateral
Cash collateral received/posted
Securities collateral received/
posted5

89,35198,305

9,606

156,121

TOTAL SECURITIES COLLATERALRECEIVED/POSTED

89,47198,305

9,721

156,121

NET AMOUNT

4,383(80,090)

7,825(83,680)0$ 7,825

NET AMOUNT IN ACCORDANCEWITH ASC 2106

120

$

4,383

For theyear ended
June 30, 2022
Net profit/(loss)4$ 484,118
19,1692,290(24)$ 505,553

115

$

$

0

1 For the year ended June 30, 2023 and 2022 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$ 18,505,877
2,790,305
3,517,860$ 24,814,042

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, 2023 and 2022 aredisclosed below (in thousands of dollars):

As of June 30, 2023
Remaining
unfunded
Estimated
commitments
remaining life2
4 – 10$ 8,958,071
2,048,930
4 – 102,317,366
2–8$ 13,324,367

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

As of June 30, 2022
Remaining
unfunded
Estimated
commitments
remaining life2
4 – 10$ 8,858,770
2,068,329
4 – 102,902,708
2–8$ 13,829,807

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

30

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.

4. RECEIVABLES
The major components of receivables, net of reserves for
doubtful accounts of $16.4 million and $16.5 million as ofJune 30, 2023 and 2022, respectively, were as follows (inthousands of dollars):

Federal Sponsored Support
Publications
Continuing Education and Executive Programs
Leases
Tuition and Fees
Non-federal Sponsored Support
Gift Receipts
Other
TOTAL RECEIVABLES, NET

2023$ 74,844
69,48757,33032,82022,57917,791
7,067
67,353$ 349,271

2022$ 67,130
61,54563,62932,525
19,584
13,15917,34464,876$ 339,792

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

2023
Allowance$$

22,24073,473
95,713
300,710
42,527$ 438,950

$

519
1,631
2,150
179
36,22038,549Government revolving loans are funded principally withfederal advances to the University under the Perkins
Loan, the Health Professions Student Loan (HPSL) andLoans for Disadvantaged Students in Health Professions(LDS) Programs. These advances totaled $24.7 million and$29.5 million as of June 30, 2023 and 2022, respectively, andare included in “Deferred revenue and other liabilities” in
the Consolidated Balance Sheets. During fiscal year 2018, theNet$

21,721
71,842
93,563
300,5316,307$ 400,401

Receivable

2022
Allowance$$

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

$

643
1,644
2,287
179
42,647
45,113

Net$

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

Perkins Loan Program ended and as a result the University
began making required repayments to the government.
In fiscal year 2023, the University made the requested$4.6 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.

harvard university  notes to consolidated financial statements

31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,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 conditionof specific borrowers, the economic environment in which
the borrowers operate, the level of delinquent loans, thevalue of any collateral, and, where applicable, the existenceof any guarantees or indemnifications. In addition tothese factors, the University reviews the aging of the loans
receivable and the default rate in comparison to prior years.
The allowance is adjusted based on these reviews. The
University considers the allowance at June 30, 2023 and2022 to be reasonable and adequate to absorb potential
credit losses inherent in the loan portfolio.

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 $351.2 million and $246.6 million for the years
ended June 30, 2023 and 2022, respectively, were calculatedusing rates ranging from 0.7% to 5.0%.
Pledges receivable included in the financial statements asof June 30, 2023 and 2022 are expected to be realized asfollows (in thousands of dollars):Within one year
Between one and five years
More than five years
Less: discount and allowance foruncollectible pledges
TOTAL PLEDGES RECEIVABLE, NET2023$ 866,208
1,711,457
603,7132022$ 816,775
1,637,886
541,641(481,744)$ 2,699,634(403,868)$ 2,592,434

Pledges receivable as of June 30, 2023 and 2022 have been
designated for the following purposes (in thousandsof dollars):
2023

2022

General Operating Account balances:
Gifts for current use
Non-federal sponsored awards
Construction and life income
Total General Operating Account balances$ 952,604
199,014294,530
1,446,148$ 665,632
186,725
306,891
1,159,248

Endowment
TOTAL PLEDGES RECEIVABLE, NET

1,253,486$ 2,699,634

1,433,186$ 2,592,434

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 $122.4 million and $110.0 million as ofJune 30, 2023 and 2022, respectively.

harvard university  notes to consolidated financial statements

32

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, 2023 and2022 are summarized as follows (in thousands of dollars):2023$ 3,446,121
2,596,184
2,638,555
435,738
1,148,704
549,5031,001,370
280,432
1,024,986
554,978
1,488,311
15,164,882(6,568,899)$ 8,595,983

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

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 10 years.

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 $276.6 million and $267.4 million asof June 30, 2023 and 2022, respectively.

The University has asset retirement obligations related
to future estimated environmental remediation costs of$186.2 million and $189.2 million, which are included in“Deferred revenue and other liabilities” in the Consolidated
Balance Sheets as of June 30, 2023 and 2022, respectively.

The costs of research facilities are separated into theshell, roof, finishes, fixed equipment, and services. These
components are separately depreciated.

Right-of-use assets from finance leases of $45.5 million
and $52.3 million are included in “Fixed assets, net” in
the Consolidated Balance Sheets as of June 30, 2023 and2022, respectively. Lease liabilities from finance leases of$79.2 million and $88.2 million are included in “Deferred
revenue and other liabilities” in the Consolidated Balance
Sheets as of June 30, 2023 and 2022, respectively.

Equipment includes general and scientific equipment,
computers, software, furniture, and vehicles.

harvard university  notes to consolidated financial statements

33

8. ENDOWMENT AND GENERAL OPERATING ACCOUNT NET ASSETSThe University’s net assets consisted of the following as of June 30, 2023 and 2022 (in thousands of dollars):
2023
Without
donor
restrictions

With donor
restrictions

2022

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$ 9,652,906 $ 9,652,906
30,201,162

30,201,162

1,253,486
411,747
41,519,301

9,229,293
1,253,486
411,747
50,748,594
6,640,552$ 9,229,293

9,229,293
6,640,552

3,395,9783,395,978100,178
100,178
6,640,552
3,496,156
10,136,708
634,217634,217$ 15,869,845 $ 45,649,674 $ 61,519,519

Endowment
The University’s endowment consists of approximately
14,500 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 (seeNote 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 thefair 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$ 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

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
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, 2023 and 2022, funds in a deficit position werereported in net assets with donor restrictions and arecomprised as follows (in thousands):
2023

2022

Fair value of underwater endowment funds
Historic dollar value$ 241,967
246,804$ 369,782
378,931

TOTAL DEFICIT OF UNDERWATERENDOWMENT FUNDS$(4,837) $(9,149)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 2023, the endowment distribution
approved by the Corporation (prior to decapitalizations) was
equal to 4.7% 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 $2.2 billion and $2.1 billion in fiscal year 2023 and2022, respectively.

harvard university  notes to consolidated financial statements

34

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$43.4 million and $36.7 million in fiscal year 2023 and2022, respectively. These additional decapitalizations, in
combination with the endowment distribution, resulted
in an aggregate payout rate of 4.7% and 4.2% in fiscal year
2023 and 2022, 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
4.9% and 3.5% as of June 30, 2023 and 2022, 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 2023 and 2022 were as follows (in thousandsof dollars):2023

Investment return:
Investment income
Realized and change in unrealized appreciation/(depreciation), 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$$

19,76039,92559,685
6,279(74,072)(50,747)(28,398)
20,930(66,323)
700,540634,2172022$

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

1 Shown at net present value. The undiscounted value of these gifts was $12,342 and $26,626 for the years ended June 30, 2023 and 2022, respectively

Split interest agreement net assets as of June 30, 2023 and 2022 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

2023

2022

$ 1,006,615
99,011
265,662
149,151
1,520,439$ 1,039,122
101,899
305,536
140,000
1,586,557(815,056)(71,166)(886,222)(819,802)(66,215)(886,017)

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$

634,217$700,540

1 For the year ended June 30, 2023, $863,185 of SIA investments are held in the pooled general investment account and $657,254 of SIA investments are heldin the other investments outside the general investment account. For the year ended June 30, 2022, $934,970 of SIA investments are held in the pooled generalinvestment account and $651,587 of SIA investments are held in the other investments outside the general investment account. Refer to Note 3.

harvard university  notes to consolidated financial statements35

10. BONDS AND NOTES PAYABLE
Bonds and notes payable as of June 30, 2023 and 2022 were as follows (in thousands of dollars):
Fiscal yearof issueFiscal year of
final maturity1

Effective
rate2

2000-2006
2000
2023

2032
2036
2024

1.7%
2.4%
3.0%
2.2%

Outstanding principal
20223
20233

TAX-EXEMPT BONDS AND COMMERCIAL PAPER:
Variable-rate demand bonds and commercial paper:
Series R – daily
Series Y – weekly
Commercial paper
Total variable-rate bonds and commercial paper
Fixed-rate bonds:
Series 2016A
Series 2020A
Series 2022B
Total fixed-rate bonds

2017
2020
2022

2041
2031
2033

TOTAL TAX-EXEMPT BONDS AND COMMERCIAL PAPER$

98,300117,905
25,000241,205$

114,750
117,905
232,655

4.1%
4.3%
4.3%
4.1%

1,434,825
346,680
207,830
1,989,335

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

3.9%

2,230,540

2,248,535

5.2%
5.2%

152,296
152,296

0

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
500,000
3,445,000

4.1%

3,597,296

3,445,000

Various84,730321,570(19,402)$ 6,214,734

83,796
360,763(20,891)$ 6,117,203

TAXABLE BONDS AND COMMERCIAL PAPER:
Variable-rate bonds and commercial paper:
Commercial paper
Total variable-rate bonds and commercial paper

2023

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

2024

2039
2039
2041
2038
2057
2051
2053

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

Various

Various

4.0%

1 The weighted average maturity of the portfolio on June 30, 2023 was 17.1 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 0.01% (4.03% vs 4.04%).
*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.

Interest expense related to bonds and notes payable, netof amortization and accretion, was $207.4 million and$183.0 million for fiscal 2023 and 2022, respectively. Theinterest expense in the Consolidated Statement of Changes
in Net Assets with General Operating Account Detail includes
additional components related to finance leases. Excluding
maturity of commercial paper, unamortized discounts
and premiums, unamortized underwriter’s discountand unamortized cost of issuance, scheduled principal
payments are (in thousands of dollars):

Fiscal year
2024
2025
2026
2027
2028
Thereafter
TOTAL PRINCIPAL PAYMENTS

harvard university  notes to consolidated financial statements

Principal payments$
92,25341,441
100,967
102,795
104,656
5,293,158$ 5,735,270

36

Bonds and notes payable increased from $6.1 billion to$6.2 billion in fiscal year 2023, primarily due to issuanceof $25.0 million in tax-exempt commercial paper and$152.3 million in taxable commercial paper. The proceedsof the tax-exempt commercial paper were used to fundcapital spending and the proceeds of the taxable commercial
paper were used to fund institutional liquidity. Offsetting
the commercial paper issuances were $43.0 million
of principal maturities, along with $36.8 million ofamortizing bond premium (net of amortizing fees andissuance discounts).
The University is rated Aaa by Moody’s Investors Service
and AAA by Standard & Poor’s Global Ratings. The Moody’s
rating was re-affirmed in February 2023 and the Standard &Poor’s was re-affirmed in March 2023.
The University has one unsecured, revolving credit facility
with a syndicate of banks totaling $1.5 billion, which expiresin December 2025. The facility was renewed in December
2022. There was no outstanding drawn balance on the credit
facility at June 30, 2023.
The University has taxable commercial paper available
totaling $2 billion. There was a $152.3 million drawn
balance on the taxable commercial paper line atJune 30, 2023.

The University has tax-exempt commercial paper available
totaling $1 billion. There was a $25.0 million drawn balanceon the tax-exempt commercial paper line at June 30, 2023.
At June 30, 2023, the University had $216.2 million ofvariable rate demand bonds outstanding (excludingcommercial paper) with either a 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 thebonds become subject to mandatory tender, the purchaseprice of the bonds will be paid from the remarketing ofsuch bonds. However, if the remarketing proceeds are
insufficient, the University will have a general obligation topurchase the bonds tendered with cash on hand.

Interest rate exchange agreements
In fiscal 2023, 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 ($3.6) million and ($8.6) million as of June 30, 2023
and 2022, respectively, and is recorded in “Other liabilities
associated with the investment portfolio” on the University’s
Consolidated Balance Sheets.

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.

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 tothe plan. The University has recorded both an asset and aliability related to the plan of $220.1 million as of June 30,2023 and $191.5 million as of June 30, 2022; 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.

Pension benefits
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.
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 $793.1 million and $851.2 million as of June 30, 2023
and 2022, respectively. During fiscal years 2023 and 2022,
the University made cash contributions to the defined
benefit pension plan of $12.7 million and $20.0 million,
respectively. The University recorded expenses for its
defined contribution plans of $175.7 million for fiscal year
2023 and $155.1 million for fiscal year 2022.

harvard university  notes to consolidated financial statements

37

Postretirement health benefits
The University provides postretirement health coverageand life insurance to substantially all of its employees. As ofJune 30, 2023, the University had internally designated andinvested $996.9 million in the GIA to fund the postretirement
health benefit accrued liability of $799.0 million. As ofJune 30, 2022, the University had internally designated andinvested $1.0 billion to fund the postretirement health benefit
accrued liability of $835.2 million.
The following table sets forth the pension and postretirement
plans’ funded status that is reported in the Consolidated
Balance Sheets as of June 30, 2023 and 2022 (in thousandsof dollars):Pension benefits
2023

Change in benefit obligation:
Benefit obligation, beginning of year
Service cost
Interest cost
Plan participants’ contributions
Gross benefits paid
Actuarial gain
Plan amendments$

BENEFIT OBLIGATION, END OF YEAR 1
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 2

$

2022

944,511
6,629
46,401$ 1,139,945
11,20834,980(87,732)(75,442)(52,631)(188,991)

834,367

944,511851,205
16,93912,721

1,061,693(177,857)
20,000

Postretirement health benefits
2023
2022
$

835,208
22,052
41,361
10,377(44,496)(65,592)54$ 1,000,395
32,54232,643
9,527(40,664)(199,211)(24)

798,964

835,208

31,137
9,527(40,664)(87,732)(52,631)

34,11910,377(44,496)

793,133

851,20500(798,964)$ (835,208)(41,234)$(93,306)$

1 Measurement of the University’s pension obligation including assumed salary increases (required by GAAP).
2 These amounts totaling $840,198 as of June 30, 2023 and $928,514 as of June 30, 2022 are included in the “Accrued Retirement Obligations” line in theConsolidated Balance Sheets.

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$760.6 million at June 30, 2023 and $846.8 million atJune 30, 2022. The funded status disclosed above has been
prepared in accordance with pension accounting rules.
When measured on an IRS funding basis, which informs
the University’s required cash contribution amount, theplan was overfunded at January 1, 2023.

harvard university  notes to consolidated financial statements

38

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 are summarized as follows for the years ended June 30, 2023 and 2022 (inthousands of dollars):Components of net periodic benefit cost:
OperatingService cost
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 (gain)/loss
Plan amendments
Amortization of:Prior service (cost)/credit
Actuarial (loss)/gain
Total other amounts recognized in non-operating activity1
TOTAL RECOGNIZED IN THE CONSOLIDATEDSTATEMENTS OF CHANGES IN NET ASSETS
WITH GENERAL OPERATING ACCOUNT DETAIL

Pension benefits
2023
2022

Postretirement health benefits
2023
2022

6,629
6,629

$ 11,208
11,208$ 22,052
22,052$ 32,542
32,542

46,401(42,209)

34,980(40,026)

41,36132,643287
4,479
11,108

7,242
287
2,483
13,691(19,055)(7,931)
14,37536,427(4,650)(7,929)20,06452,606(50,173)

28,893(65,592)
54(199,211)
(24)

(287)
(50,460)(287)(7,242)
21,364

7,931
19,055(38,552)

7,929
4,650
(186,656)$ (39,352)$ 35,055(2,125)$ (134,050)$$

1 These amounts totaling ($70,158) in fiscal year 2023 and ($142,745) in fiscal year 2022 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, 2023 and 2022 (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
2023
2022
12,075$ 62,248
33
320

Postretirement health benefits
2023
2022
$ (409,029)$ (362,492)(25,779)(33,765)

12,108$ (434,808)$

62,568$ (396,257)39

Other assumptions and health care cost trend rates used in determining the year end obligation as well as the net periodic
benefit cost of the pension and postretirement health plans are summarized as follows for fiscal years 2023 and 2022:
Pension benefits
2023
2022
Weighted-average assumptions used to determine benefit obligation
as of June 30:
Discount rate
Compensation increase trend:
Initial rate
Ultimate rate
Year of ultimate
Cash balance (or similar formula) interest crediting ratePension increases for in-payment benefits increase trend:
Initial rate
Ultimate rate
Year of ultimate
Current health care cost trend rate:
Pre-65
Post-65
EGWP
Ultimate health care cost trend rate:
Pre-65 and Post-65
EGWP
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
Initial rate
Ultimate rate
Year of ultimate
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
2023
2022

5.70%

5.05%

5.60%

4.90%

5.00%
3.50%
2025

5.00%
3.50%
2025

5.00%
3.50%
2025

5.00%
3.50%
2025

5.25%

5.25%

n/a

n/a

1.00%
0.13%
2024

1.50%
0.25%
2025

n/a
n/a
n/a

n/a
n/a
n/a

n/a
n/a
n/a

n/a
n/a
n/a

7.25%
6.75%
16.00%

7.00%
7.00%
7.00%

n/a
n/a
n/a

n/a
n/a
n/a

5.00%
4.00%
2029

5.00%
5.00%
2029

5.05%
4.75%

3.15%
4.50%

4.90%
n/a

3.20%
n/a

n/a
5.00%
3.50%
2025

3.50%
0.00%
n/a
n/a

n/a
5.00%
3.50%
2025

3.50%
n/a
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

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, 2023 and 2022, along withtarget allocations for June 30, 2024, is as follows:

Asset allocation by category for pension plan:
Fixed income securities
Equity securities
Cash
TOTAL OF ASSET ALLOCATION CATEGORIES

harvard university  notes to consolidated financial statements

2024 Target

June 30, 2023

June 30, 2022

75-85%
15-25
1-5

80.4 %
19.5
0.1
100.0 %

79.7 %
19.6
0.7
100.0 %

40

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 2023, the University increased its allocation to
fixed income securities to manage the interest rate volatility
associated with its pension obligations. The University

expects to keep this strategy in future years. The investment
program is also managed to comply with all ERISA
regulations.
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, 2023 and 2022 (inthousands of dollars):

2023

Level 1
PLAN ASSETS:
Cash and short-term investments
Domestic equity
Foreign equity
Domestic 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

2022

Level 3

$ 13,408
64,30530,339NAV aspractical
expedientTotal$

13,40864,30572,215
589,061
14,776137
1,250
37,974$ 793,126
7$ 793,133$ 41,876
589,061

14,776$ 122,828

Expected future benefit payments
Employer contributions of $13.3 million are expected forfiscal year 2024 to fund the pension benefit plan.

$

0

$

0

137
1,250
37,974$ 670,298

Total
$

$
$

17,94287,02562,956
633,453
12,880265
1,368
35,313
851,2023
851,205

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

Fiscal year
2024
2025
2026
2027
2028
Thereafter

Pension$ 66,508
66,15067,254
68,262
69,101
349,471

Expected benefit payments
Postretirement health$ 28,005
29,851
32,217
34,67437,187
227,876

12. STUDENT FINANCIAL AID
Financial aid granted to students in fiscal 2023 and 2022 is summarized as follows (in thousands of dollars):
2023
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$$

530,743
181,295
712,038
101,699
13,722
23,889851,3482022$$

505,904
171,312677,216
93,581
14,12421,505806,426

1 Includes $235,832 and $224,863 in fiscal 2023 and 2022, respectively, of undergraduate scholarships applied to student income.
2 Represents aid from sponsors for which the University acts as an agent for the recipient.

harvard university  notes to consolidated financial statements

4113. SPONSORED SUPPORT
Total expenditures funded by US government sponsors
or by institutions that subcontract federally sponsored
projects to the University were $676.1 million and$642.1 million in fiscal year 2023 and 2022, 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), and theT.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, 2023 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$ 482,107
232,226
566,660
6,279
96,210$ 1,383,482

2023
Donor redesignations/other changes$ 3,775(2,782)(6,053)(35)$ (5,095)

Total
485,882
229,444560,607
6,279
96,175$ 1,378,387$

1 Shown at net present value. The undiscounted value of these gifts was $12,342 for the year ended June 30, 2023.

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

4215. OTHER REVENUE
The major components of other revenue for the years ended
June 30, 2023 and 2022 were as follows (in thousandsof dollars):Publications and royalties from copyrights
Rental and parking1
Services income
Health and clinic fees
Royalties from the commercialization of
intellectual property2
Sales income
Interest income
Other student income
Other
TOTAL OTHER REVENUE

2023

2022

$ 281,024
141,449
136,81172,580$ 277,104
116,070
135,240
70,21458,989152,078

32,37615,317
5,025
49,345$ 792,916

31,4238,373
4,326
43,495$ 838,323

1 The University is the lessor of space and facilities under operating leases,

the income from which is included in rental and parking.

2 Excludes distribution to external parties.

16. OTHER EXPENSES
The major components of other expenses for the years
ended June 30, 2023 and 2022 were as follows (inthousands of dollars):

Subcontract expenses undersponsored projects
TravelAdvertising
PublishingTaxes and Fees
Insurance
Postage
TelephoneFixed asset impairments
Other
TOTAL OTHER EXPENSES

2023

2022

$ 179,941
93,44965,35350,202
42,19623,207
14,911
10,971
7,394
90,756$ 578,380$ 179,212
43,73753,00745,09738,706
25,66914,907
11,153
21,38561,702$ 494,575

17. FUNCTIONAL AND NATURAL CLASSIFICATION OF OPERATING EXPENSES
Operating expenses by functional classification for theyear ended June 30, 2023 were as follows (in thousandsof dollars):

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

2023

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$ 1,261,358
307,980
407,481
47,043
128,490
85,546
21,30737,026$ 2,296,231$

Research1
330,493
77,943
126,438
155,078
68,28260,94648,498442,002$ 1,309,680

Student services
and support$ 164,182
54,257
69,973
16,59533,85944,306
14,397
181,295
35,189$ 614,053

Institutional
support andauxiliary$ 665,043
188,124
188,049
206,093
163,448
92,525
124,388
64,163$ 1,691,833

Total$ 2,421,076
628,304
791,941
424,809394,079
283,323
208,590
181,295
578,380$ 5,911,797

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

governmental surveys.

harvard university  notes to consolidated financial statements

43

Operating expenses by functional classification for the year ended June 30, 2022 were as follows (in thousands of dollars):
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.

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 of use
assets and lease liabilities are included in “Fixed assets, net”
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.
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 $114.0 million and$101.2 million in fiscal year 2023 and 2022, respectively.

Maturity analysis of the annual undiscounted cash flows
reconciled to the carrying value of the operating and financelease liabilities (in thousands of dollars):
2024
2025
2026
2027
2028
Thereafter
TOTAL LEASE PAYMENTS
Less: Imputed Interest
PRESENT VALUE OF LEASE LIABILITIESOperating
Finance$ 77,369 $ 11,524
80,07011,91375,344
21,99570,808
11,95769,72013,018573,984
98,505947,295
168,912(193,100)(89,689)$ 754,195 $ 79,223

Weighted-average remaining lease term and discount rate
for operating and finance leases were as follows:
June 30, 2023
Weighted average remaining lease term
Operating leases
Finance leases
Weighted average discount rate
Operating leases
Finance leases

15.1 years
14.3 years
2.9%
2.4%

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, net” in theConsolidated Balance Sheets. Revenue is recognized to theextent that amounts are determined to be collectible.

harvard university  notes to consolidated financial statements

44

Fixed asset-related commitments

GeneralThe 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, 2023
totaled approximately $478.6 million.

The 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 the eventual
outcome of such actions, management believes that theoutcome of these proceedings will not have a material
adverse effect on the University’s financial position, changes
in net assets, or cash flows.

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.

The University has evaluated subsequent events throughOctober 18, 2023, the date the financial statements were
issued. The University has concluded that no material
events have occurred that are not accounted for in theaccompanying financial statements or disclosed in theaccompanying notes.

harvard university  notes to consolidated financial statements

45

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
C L A U D I N E G AY
C L A U D I N E G AYPresident

President
TIMOTHY R. BAR AKE T T
T I M O T H Y R . B A R A K E T T*

Treasurer

Treasurer
AL AN M. GARBERK E N N E T H I . C H E N A U LT*

ProvostPA U L J . F I N N E G A N
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*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
G E R A L D I N E A C U Ñ A - S U N S H I N E*

MARC GOODHE ART

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

Vice President for Human Resources

MONIC A BHARELR A P H A E L W. B O S T I C
S Y LV I A M AT H E W S B U R W E L L+
MARK J. C ARNE Y*

RITU K ALR A

Vice President for Finance andChief Financial Officer

ALICE HM CHEN
PHILIP HART CULLOMBRIAN K . LEE

SANGU J. DELLE

Vice President for Alumni Affairs
and Development

J E F F R E Y D. D U N N +F I O N A H I L L+
M E R E D I T H (M A X ) H O D G E SDIANE LOPEZ

M A R I LY N H O L I F I E L D

Vice President and General Counsel

C H R I S T O P H E R B . H O WA R D
VIVIAN HUNTT YLER JACK S*
JOHN B. KING JR.
VA N E S S A W. L I U +R AY M O N D J . L O H I E R , J R .
S CO T T M E A D
L AUREN ANCEL ME YERS

K L A R A J E L I N KO VA

Vice President and Chief
Information Officer
SE AN C ARON

Vice President for Campus Services

T O D D Y. PA R K*
MARGARET PURCER O B E R T L . S AT C H E R +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 3 -24

V I K A S P. S U K H AT M E* JCI MEMBERJ AY S O N U. T O W E H
WILHEMINA WRIGHTSHERYL WUDUNNA S O F O C T O B E R 2 02 3