successfully maintained a relatively steady relationship between program and support costs, i.e., the growth rate of indirect costs was approximately equal to the growth rate of direct costs. In 2006, total indirect expenses were $64.3 million compared to an approved budget of $65.0 million. As the 2007 program revenues are expected to remain consistent with the prior year, the NAS Council authorized a 2007 indirect expense budget of $67.9 million in order to maintain the desired relationship between indirect and direct costs. This budget includes a 4.0 percent increase in the base salary compensation structure in order to maintain a competitive position in the marketplace for hiring and retaining staff.

Related Entities

There are many financial transactions exchanged between the member organizations of the National Academies. The NRC serves as the clearinghouse for these transactions. However, it is important to note that only the financial activity and results of the NAS, NAE, IOM, and NRC are included in these financial statements.

The financial activity and results of the National Academy of Engineering Fund (NAEF) and the National Academies Corporation (TNAC) are audited and reported separately. Financial information for the NAEF is available on request from the NAE Finance Office; information for TNAC is available from the NAS Controller’s Office.

Overall Financial Condition

The results of operations, per the NAS Statements of Activities, are summarized as follows:


(Dollars in millions)



Total Revenues





Total Expenses





Change in Net Assets





Each year, the overall financial condition of the NAS can be reviewed by taking into account the increase or decrease in the net assets of the organization. During 2005 and 2006, the NAS has been able to increase its net assets, due in large part to the favorable results from the Endowment investments and generous gifts from donors.


The NAS and NRC continued to demonstrate financial strength and stability during 2006. The NRC program remained stable, and the indirect expenses were well under control. The 19.0% investment return achieved in the NAS Endowment in 2006 will strengthen our ability to help provide more financial support to NAS initiatives in the future. Furthermore, the NAS continued to enjoy important financial support from members, friends, and philanthropic organizations.

In conclusion, NAS continues to be in sound financial condition, which allows the institution to respond to the many opportunities and challenges presented by an ever-changing external environment.

Ronald L. Graham


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