The Tower Foundation directly manages all financial aspects of the university’s donations. The Tower is exempt from taxation under Section 501(c)(3) of the Internal Revenue Code. It is certified as an auxiliary in good standing with the California State University System. A firm of certified public accountants audits the Foundation’s financial records annually.
Prior to the establishment of the Tower Foundation, all philanthropic funds were managed by the SJSU Research Foundation along with the campus' government-funded sponsored programs. Over the last three years, philanthropic assets have been transitioned from the Research to the Tower Foundation in order to provide a specific focus on fundraising and to prepare for the campus' first-ever comprehensive campaign.
For the fiscal year that ended June 30, 2008, the Tower Foundation was audited by McGladrey and Pullen, Certified Public Accountants. The audit was conducted in accordance with generally accepted auditing standards and, in their opinion, the financial statements presented fairly, in all material respects, the financial position of Tower Foundation as of June 30, 2008 in conformity with accounting principles generally accepted in the United States of America. Their independent auditor's report expressed an unqualified opinion.
Tower Foundation's total net assets increased $5.6 million from fiscal year 2007 to fiscal year 2008 due to an increase in donations partly offset by losses in the investment portfolio. From fiscal year 2006 to 2007, total net assets increased by $40.5 million. Two major gifts received in fiscal year 2007 totaling $25 million primarily accounted for the dramatic upswing in operating revenues. Also increases in pledges receivable, assumption of donation accounts and charitable remainder trusts from the SJSU Research Foundation, and an increase in bequests receivable occurred.
Non-operating revenues came from sources that are not part of the foundation's primary business functions, such as interest and investment income, and changes in the value of the endowment portfolio. Consistent with broader economic conditions, Tower's investment income decreased from fiscal year 2007 to fiscal year 2008 due to the decline in investment performance. Investment income increased by $5.8 million from fiscal year 2006 to fiscal year 2007 due to positive increases in the market value of investments held during that period.
Expenses for support activities of San José State University represent the use of gift funds for programs, scholarships and other academic activities of the campus. These activities increased by $2.5 million from fiscal year 2007 to fiscal year 2008 and $2.7 million from fiscal year 2006 to fiscal year 2007. Tower's general and administrative expenses for fiscal year 2007, at $786,634, represent 4.3% of total operating revenues. View a condensed summary of net assests as of June 30, 2006, 2007, and 2008 [PDF].
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Typically, the larger the endowment, the stronger a university's academic reputation. Alumni and friends know that when they contribute to their university, they're investing in future generations. The value of a university endowment makes a statement about the value of every degree granted.
The SJSU endowment portfolio is comprised of 384 individual funds benefiting all areas of the campus -- from the colleges to the Martin Luther King, Jr. Library, to intercollegiate athletics and other university-wide programs. Most endowments are restricted to specific uses such as establishment of a scholarship, support for a center, or creation of an endowed chair.
At more than $50 million, the SJSU endowment continues to grow. In 2007-08, more than $9 million in new principal was added to the endowment.
SJSU's endowment places it at No. 529 among approximately 800 universities reporting endowments. This is up from our ranking of 546 in 2006 and 559 in 2005. The 2007 annual endowment standings published by the National Association of College and Business Officers show that 76 universities have endowments that top $1 billion.
The Tower Foundation works with the investment firm of Beacon Pointe Advisors to allocate the endowment assets to a diversified portfolio of domestic and international equities, fixed income, real estate, cash equivalents, and other investments, all of which reflect varying rates of return. The long-term financial objective of the portfolio is to produce a relatively predictable and stable spending stream each year and to grow both the spending stream and the corpus over time, at least as fast as the general rate of inflation.
San José State's endowment performance faced tough economic conditions. Our oneyear composite return as of June 30, 2008 was down 11.8% with the three-year composite return at a positive 4.9% and the five-year composite at 8.5%.
As California's public universities face continued budget challenges, SJSU's endowment becomes even more important to our success. This year's endowment distribution of $1,845,367 helps fund programs that are vital to San José State. Income from the endowment provides student scholarships such as the Don Kassing Football Scholarship; vibrant programs such as the Guru Nanak Heritage Institute for Punjabi Studies and the Library Leadership Endowments; and sustainable fellowship programs such as the Steinbeck Fellows endowment.
The annual distribution is based on 4% of the average market value of the endowment for the previous three years ending March 31. According to a survey conducted by the Council for Advancement and Support of Education, university distributions typically range from 3-5% of the market value of the endowment. SJSU's 4% distribution was approved by the Tower Foundation Board of Directors and is consistent with CSU distribution recommendations. A three-year average is used to minimize the impact of market fluctuations on the endowment funds and is consistent with practices adopted at other leading universities. For 2007-08 the management fee charged to the endowment was 2%, which covers administrative costs and provides a sizeable investment in SJSU's first comprehensive fundraising campaign.
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