Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 1
Treasurer’s Statement University of California and will join the staff in the
summer of 2012. As President Cicerone stated, "His
experience in managing major science enterprises for the
federal government on behalf of leading academic
To the Council of the National Academy of institutions will serve us well."
Sciences:
NAS Highlights
This Report of the Treasurer of the National Academy of
Sciences presents the financial position and results of
Endowment, Trust, and Other Long-term Investments
operations as well as a review of the endowment, trust,
Portfolio
and other long-term investments portfolio activities of our
Academy for the year ended December 31, 2011.
As the Chairman of the Finance Committee, I am
responsible, along with the other committee members, for
Overview the prudent management of the endowment, trust, and
other long-term investments portfolio (the “Portfolio”).
The income that supports the activities of the Academy The goal of the endowment is to provide stable support
comes from two major sources: program revenue received for the Academy’s programs and activities. To achieve
from sponsors to pay for the myriad studies and other this goal, the Council, acting on the recommendation of
activities undertaken each year by the National Research the Finance Committee, has historically authorized
Council (NRC), and a much smaller sum that we obtain spending from the Portfolio at a rate designed to maintain
from our own endowment under the endowment spending the purchasing power of the endowment over time. The
policies adopted by the Council. Regarding the first of current spending rule caps annual spending at 5 percent of
these, the 2011 results are very positive. Our total the trailing 12-quarter average market value of the
program revenue for 2011 was nearly 10% above 2010 Portfolio. As I have already noted, the Council has
revenue, an all-time high for the NRC. There are many limited spending to 4% since 2009.
NRC volunteers and staff who deserve credit for this
strong showing and we are truly indebted to each one for During 2011, the portfolio, along with the broader market,
their commitment to the mission of our organization. experienced a relatively small decline. This still leaves us
in recovery territory after the 2008 market downturn. The
With respect to the second source of revenue, it has for market value of the portfolio decreased net of withdrawals
many years been the policy of the Council to limit annual and new contributions from $383.9 million on January 1,
endowment spending to 5% of the average value of 2011, to $352.2 million at December 31, 2011. The
endowment for the twelve quarters ending in June of the portfolio returned -5.6% for the year which was 0.7%
previous year. When the endowment declined signifi- lower than the relevant benchmark return of -4.9%. The
cantly in 2008, the Council made the prudent decision to portfolio was helped greatly by the performance of its
hold spending to 4% and to avoid spending whenever private equity and venture capital investments in China
possible from endowments with value below the original and India. The hedge fund investments in the portfolio
gift amount, starting in 2009. These practices will had relatively poor returns this year, as hedge funds in
continue for endowment spending in 2012. general encountered their most difficult year in the last
decade. During the year, the Finance Committee felt that
As you know, our former Executive Officer, Bill Colgla- it was prudent to temporarily hold more cash in the
zier left the NAS in June 2012 and joined the State portfolio for a short period of time to protect the portfolio
Department as the Secretary’s science and technology against the possibility of a severe market disruption.
advisor. Since Bill’s departure, Jim Hinchman, our
Deputy Executive Officer has been filling this role on an Toward the end of 2011 and beginning of 2012, the
interim basis. On January 27, 2012, President Cicerone portfolio became fully invested once again. In the first
announced the appointment of Bruce B. Darling as the quarter of 2012, the portfolio returned 7.3% compared to
new Executive Officer of the NAS and the NRC. Bruce is a benchmark return of 9.1%. For the ten years ended
currently vice president for laboratory management at the
1
OCR for page 2
• Withdrawals of $13.5 million were made to fund the
March 31, 2012, the portfolio returned 6.5% compared to
President’s Committee, NAS General Fund’s activity,
a benchmark return of 5.8%.
and NAS prizes and awards for the current period.
Additional withdrawals of $2.0 million were made to
The actual portfolio allocation and policy guidelines as of
fund Woods Hole, IOM, and TNAC activity.
December 31, 2011, were as follows:
NAS General Funds
Portfolio Policy
Allocation Guideline
The NAS General Funds, which provides unrestricted
Fixed-Income:
resources to support the activities of the Academy,
U.S. Fixed/Cash 13% 9%
receives its funding from the unrestricted portion of the
Non-U.S. Fixed 6% 5%
NAS Endowment. As noted above, the Council has
Equities:
limited spending from the endowment, including the
U.S. Large Cap Funds 14% 19%
unrestricted portion, to 4% since 2009.
U.S. Small-Mid Cap Funds 6% 9%
Non-U.S. Stocks – Developed 14% 20%
For fiscal year 2011, the General Funds revenue totaled
Non-U.S. Stocks – Emerging 12% 15%
$4.8 million and expenditures totaled $4.4 million,
Real Estate Investments 3% 3%
resulting in a $341,000 surplus. Comparable figures for
Hedge Funds and Alternative
fiscal year 2010 were $5.2 million in revenues, $4.6
Investments 32% 20%
million in expenditures, resulting in a $586,000 surplus.
100% 100%
Total
The 2011 NAS General Funds activity is summarized as
Market values of the Portfolio, after withdrawals, for the
follows (in thousands):
years ended December 31, 2011 and 2010, are displayed
in the following chart (in thousands):
Revenues:
Unrestricted Endowment $ 4,101
2011 2010
Annual Giving from Members 285
Cash and Fixed-Income Securities $ 67,331 $ 45,156
Membership Dues 230
Equity Securities 284,845 338,773
Annual Meeting 155
$ 352,176 $ 383,929
Total
Other 17
$ 4,788
Total Revenue
For the five years ending December 31, 2011, the
Expenses:
Portfolio return is 0.8%, which equaled the market Development Office $ 1,054
composite benchmark of 0.8% and, for the ten years Member Services:
ending December 31, 2011, the Portfolio return was 5.9% Annual Meeting 665
compared with the market composite benchmark of 4.3%. Other 207
Programs/Projects:
• See Schedule 2-A on page 22 for details of Cultural Programs of the NAS 260
investments by asset class. Evolution, Education & Communication 117
Frontiers of Science 241
• Included in the $352.2 million total market value of
Committee on International
the Portfolio as of December 31, 2011, are $6.4
Security & Arms Control 194
million for the Woods Hole Endowment Funds, $62.2 InterAcademy Council 100
million for the Institute of Medicine (IOM), and $9.2
Foreign Meetings 619
million for The National Academies’ Corporation
President’s Office 116
(TNAC). TNAC, which is equally owned by the NAS NAS Executive Office 74
and the National Academy of Engineering Fund
NRC Operations 801
(NAEF), owns and operates the Beckman Center (see
$ 4,447
Total Expenses
note 1 to the financial statements on page 45).
$ 341
Surplus
2
OCR for page 3
Any surplus in the General Funds Budget at the end of the J. Erik Jonsson Center of the National Academies at
•
year is transferred to the NAS Reserve. Similarly, deficits 314 Quisset Dr. in Woods Hole, Massachusetts.
are funded from the Reserve. The Reserve is invested in Arnold and Mabel Beckman Center at 100 Academy
•
the NAS endowment, trust and other long-term invest- in Irvine, California (jointly owned with NAEF
ments portfolio. The NAS Reserve had a market value of through TNAC).
$4.9 million on December 31, 2011, to which the 2011
surplus will be added. NAS leased the following facilities during 2011:
The NAS Council has approved a General Funds Budget Terrell Place (two suites) at 575 Seventh St. NW in
•
of $4.7 million for 2012. Washington, D.C.
National Academies Data Center at 8619 Westwood
•
Prizes and Awards Center Drive in Vienna, Virginia.
Proceedings of the National Academy of Sciences
•
Several award funds have existed for more than 100 temporary office at 700 Eleventh St. NW in
years, while others were established more recently. The Washington, D.C.
Home Secretary oversees the nomination process that Temporary office space at 555 12th Street, N.W.,
•
selects award recipients and recommends to the Council Washington, D.C.
(subject to legal and financial review) changes in the Temporary warehouse space at 6313 Gravel Ave,
•
award cycle, amounts of the honoraria, and any other Alexandria, Virginia.
administrative changes.
Restoration of the National Academy of Sciences
Journal Publications Building in Washington, D.C. has been underway since
June 2010. We are elated that the building was completed
Financial results of the Proceedings of the National and hosted the 149th Annual meeting of the NAS at the
Academy of Sciences are shown below for the years ended end of April 2012. The total cost of the project was
December 31, 2011 and 2010 (in thousands): approximately $60 million. The work was financed
through the issuance of tax-exempt fixed rate bonds,
2011 2010 which will be repaid principally from the revenue
Revenues: received from sponsors of NRC studies and other
Subscriptions $ 6,238 $ 6,880 activities that take place in the building. The project has
Author charges 6,841 7,234 restored and improved the building’s historic spaces,
Other 118 141 increased accessibility, updated the infrastructure, and
made the building into a modern conference center and
Total $ 13,197 $ 14,255
office building.
Expenses:
Publishing $ 6,653 $ 6,468
In connection with the reopening of the National
Other 5,717 5,294
Academy of Sciences Building the leases for temporary
Total $ 12,370 $ 11,762
office space in downtown Washington were terminated.
$ 827 $ 2,493
Net Later this year the lease for space in Terrell Place will
also be terminated and the staff relocated to the Keck
Facilities Center. Please see page 6 for photographs of the newly
restored NAS building.
NAS owns the following facilities:
Development Office Programs
Keck Center of the National Academies at 500 Fifth
•
St., NW in Washington, D.C. The NAS is grateful for the generous support of members,
National Academy of Sciences Building at 2101 friends, and philanthropic organizations in 2011. The
•
Constitution Ave., NW in Washington, D.C. fund-raising effort continues to focus on building
endowment and expendable unrestricted sources for the
3
OCR for page 4
been received from the estate over the last ten years,
NAS, including the Institute of Medicine (IOM).
and brings the total donation to the Dorothea and
Unrestricted gifts and endowment earnings are vital
Herbert Simon Fund to $899,000. The funds were
resources that help the NAS to initiate studies in sensitive
bequeathed for the general purposes of the NAS.
areas and to take a leadership role in addressing the
complex issues facing our nation.
• The Committee on Human Rights of the NAS, IOM
and National Academy of Engineering (NAE) re-
In 2011, the NAS and IOM received more than $1.2
ceived $309,000 in gifts including support from 136
million in unrestricted expendable support. This includes
members of the NAS, IOM, and NAE.
strong support of the annual funds. NAS members
contributed $284,000, a 12% increase over the 2010
Overall, gifts for the NAS permanent endowment in 2011
support provided. Unrestricted support was also received
totaled $2.4 million, as compared to less than $200,000 in
through the NAS Building Seat Naming Campaign. NAS
2010. Gifts for the NAS unrestricted endowment in 2011
members donated $445,000 to name 89 seats in the newly
totaled $296,000 as compared to $41,000 in 2010. These
restored NAS auditorium.
gifts are representative of the generous support the NAS
received from many members, friends, and organizations
Gifts and grants were also received to establish named
in 2011. This support is vitally important in better
endowments and fund the many projects and activities of
positioning the Academy to fulfill its critical mission as
the NAS and IOM. The selected gifts described below
scientific adviser to our nation.
highlight the scope of philanthropic support received
during 2011:
NRC Highlights
• The Raymond and Beverly Sacker Foundation
generously donated $2.1 million to the NAS in honor
Revenues
of the NAS President, Ralph J. Cicerone, to establish
the Raymond and Beverly Sackler Science Fund.
The two main sources of revenue for the NRC are the
Earnings from this endowed fund will provide sup-
U.S. government and private / nonfederal entities. The
port for studies and projects in the areas of basic
total contract and grant revenue from both of these
biology and biomedical science – including the con-
sources totaled $325.8 million in 2011 and $286.8 million
vergence of biology, physics, mathematics, and
in 2010.
engineering sciences – in addressing problems in
biomedical science and human health.
U.S. Government Contracts and Grants
• The IOM received grants totaling $9.9 million from
NRC activities, conducted in response to requests from a
Kaiser Permanente and the Michael and Susan Dell
broad range of U.S. government agencies, are funded
Foundation to support a partnership between the IOM
through cost-reimbursable non-fee contracts and grants.
and HBO Documentary Films, in association with the
National Institutes of Health and the Centers for Dis-
The total amount reimbursed by the U.S. government
ease Control and Prevention, to educate citizens
agencies in the year ended December 31, 2011, was
about the causes and consequences of the obesity
$277.1 million (see following chart, in thousands, and the
epidemic in the United States.
Statements of Activities on page 43) and in the year ended
December 31, 2010, was $242.7 million.
• The NAS’s Marian Koshland Science Museum
received a gift of $943,000 from the Daniel E.
U.S. Government Revenues by Agency
Koshland, Jr. Family Fund to support the general
Agency for International Development $ 613
purposes of the Museum.
Chemical Safety Board 346
Department of Agriculture 1,738
• The NAS received a final distribution of $254,000
Department of Commerce 12,231
from the estate of Dorothea and Herbert Simon
Department of Defense:
(NAS), which supplements the distributions that have
Department of the Air Force 8,279
4
OCR for page 5
approximately 29%. The result being that private
U.S. Government Revenues by Agency (continued)
contracts and grants increased from $35.5 million in
Department of the Army 10,545
2010 to $40.5 million in 2011.
Department of Defense 8,283
Department of the Navy 10,673
Other contributions revenue decreased from $8.6
•
Department of Education 1,569
million in 2010 to $8.2 million in 2011.
Department of Energy 11,795
Department of Health and Human Services 38,011
Expenses
Department of Homeland Security 1,849
Department of the Interior 2,551
Almost all government and private contracts and grants
Department of Justice 1,985
are cost-reimbursable agreements. Therefore, even if the
Department of Labor 553
revenues and expenses are not equal in any one given
Department of State 6,216
year, the revenues and expenses will be the same over the
Department of Transportation 122,615
life of the award.
Department of Treasury 1,356
Department of Veterans Affairs 2,998
As in many universities and nonprofit institutions,
Environmental Protection Agency 6,093
allowing adequate indirect cost expenditures for necessary
Executive Office of the President 1,784
support services, while keeping these costs in reasonable
General Accounting Office 66
proportion to program expenditures is a continual
General Services Administration 211
challenge. Historically, NRC management has
Institute of Museum and Library Services 151
successfully maintained a relatively constant relationship
Marine Mammal Commission 74
between program and support costs, i.e., the growth rate
National Aeronautics and Space Administration 9,177
of indirect costs has been approximately equal to the
National Geospatial-Intelligence Agency 334
growth rate of direct costs. In 2011, total indirect
National Science Foundation 18,602
expenses were $74.4 million compared to an approved
National Security Agency 209
budget of $77.0 million and NAS recovered $6.2 million
National Transportation Safety Board 22
more from sponsors than was spent. In the immediate
Nuclear Regulatory Commission 843
future, the indirect rates will decrease slightly in order to
Office of the Director of National Intelligence 240
compensate for this over-recovery. The NAS Council has
Social Security Administration 158
approved a 2012 indirect expense budget of $82.3 million.
Adjustment to Indirect Cost Receivable & Other (5,055)
Total U.S. Government Agencies $ 277,117
Related Entities
Private/Nonfederal Contracts and Grants
Many financial transactions take place between the
Private sponsors supplemented government projects and
member organizations of the National Academies. The
provided for new initiatives by funding awards in the
NRC serves as the clearinghouse for these transactions.
amount of $48.7 million in 2011, compared with $44.1
However, it is important to note that only the financial
million in 2010. The private and nonfederal revenues
activity and results of the NAS, NAE, IOM, and NRC are
were comprised of contracts and grants ($40.5 million)
included in these financial statements. The financial
and other contributions ($8.2 million). (See Statements of
activity and results of the National Academy of
Activities on page 43.)
Engineering Fund (NAEF) and The National Academies’
Corporation (TNAC) are audited and reported separately.
In 2011, NAS received 76 new private contracts and
•
Financial information for the NAEF is available on
grants compared with 92 in 2010. While the number
request from the NAE Finance Office; information for
of new awards decreased from 2010 to 2011, the av-
TNAC is available from the NAS Controller’s Office.
erage new donation amount increased by
5
OCR for page 6
Overall Financial Condition The NAS 2011 results of operations are further described
in the financial statements starting on page 42.
This year was quite a strong year for the NRC, reaching
its all-time high program level. While the program level
Conclusion
has been healthy, the NAS Endowment, trust, and other
long term investments portfolio experienced a decline,
I would like to thank the members of the Council, the
along with the broader market. This decline in the
Committee on Budget and Internal Affairs, the Finance
portfolio is the main reason for the 2011 decrease in net
Committee, and the NRC leadership for their continued
assets, as shown below (in millions).
support. Also, thanks are extended to the Office of the
Chief Financial Officer for its help in managing the
2011 2010
Endowment and Trust Pool, its steady oversight of the
Total Revenues $ 330.5 $ 375.6
Academy’s various budgets, and its careful attention to
Total Expenses 363.4 332.5
the Academy’s financial systems, records and reports.
$ (32.9) $ 43.1
Change in Net Assets
Net assets, or assets minus liabilities, can be a
measurement of a not-for-profit organization’s ability to
reinvest net income toward their mission while also
Jeremiah P. Ostriker
maintaining reserves and helping protect against inflation.
Treasurer
Photographs of the newly restored NAS building:
Images Courtesy of CPNAS © Maxwell MacKenzie
6
