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University CFO Says Harvard ‘Moving in the Right Direction,’ Despite Pandemic Costs

Thomas J. Hollister is Harvard's chief financial officer and vice president for finance.
Thomas J. Hollister is Harvard's chief financial officer and vice president for finance. By Courtesy of Harvard Public Affairs and Communications
By Virginia L. Ma and Kevin A. Simauchi, Crimson Staff Writers

Harvard chief financial officer Thomas J. Hollister said the University’s finances are “moving in the right direction” in a Wednesday interview, though he cautioned that officials remain alert in the ever-changing landscape of the Covid-19 pandemic.

“Thanks to the stewardship of everyone across the campus, we emerged from the pandemic in a pretty good financial condition, which we’re very fortunate to be in,” Hollister said. “Consequently, Harvard is moving forward in a lot of ways.”

Though some spikes in Covid-19 cases have shifted the University’s protocols, the situation has stabilized in comparison to the beginning months of the pandemic, Hollister said.

“The financial ramifications of those ups and downs — unless we have to go completely remote or we can’t get into the labs, or the economy really starts to shake — compared to a year, year and a half ago, things are more stable,” Hollister said. “I think that’s true across the country, I think it’s true on campuses — that we’re all kind of living with this [pandemic].”

To prepare affiliates for an in-person semester, the University spent $83 million in Covid-19 testing and contact tracing, personal protective equipment, and equipment to reconfigure laboratories and classrooms for safe, in-person learning, according to an annual financial report released in October.

Now, Hollister said, Harvard is better equipped to handle pandemic-related costs because much of the virus prevention framework is already in place.

“I would say that the testing and tracing will be more, but a lot of the [costs associated with] one-time setup, get organized, try to figure out how to run the campus will be less,” Hollister said.

Despite the added costs accrued from pandemic-related expenses and losses, the University still ended the last fiscal year with a $283 million surplus in its operating budget.

Bolstered by strong financial markets, the endowment skyrocketed to a historic value of $53.2 billion based on the latest returns reported in October.

While financial experts pointed out that Harvard’s endowment underperformed compared to its peer institutions despite its record returns, Hollister praised Harvard Management Company CEO Narv N.P. Narvekar’s leadership and his performance over the past four years.

“I think the management team — Narv Narvekar and his colleagues — are doing an excellent job,” Hollister said. “Over the last four years of Narv’s leadership, the average return has been 14.8 percent, which is really excellent, and the comparative returns in fiscal years 2019 and 2020 exceeded many of our peers.”

“In fact, Narv says it in his letter, if he had the same asset allocations as our peers, we would have been much higher on our returns. But everything is moving in the right direction,” he added.

With returns surpassing 30 percent, Hollister said he expects the University’s operating budget to receive a bump in funding from the endowment’s payout.

According to the annual financial report, the University received an increase in current-use gifts — donations without specific spending restrictions — last year, which allowed for more funds to be directed to health and safety provisions and financial aid. Hollister said he hopes the University continues to receive these unrestricted donations.

“I don’t have a crystal ball on the economy or the stock market, which make a big difference to alums and graduates in their capacity or willingness to make donations,” Hollister said. “We’re very cautious in estimating what may happen, and we hope to be surprised on the upside.”

Hollister added that the University is also focused on reinvigorating the undergraduate house renewal project, which was delayed due to a citywide construction moratorium mandate at the onset of the pandemic.

Resuming construction has not been easy, however, given pandemic-related disruptions to supply chains, according to Hollister.

“Sometimes getting key raw materials or even getting people to work on the jobs has been more of a challenge, but we’re steady-as-she-goes,” Hollister said. “Adams House has been done in different phases, and those phases are very active right now, and we expect them to continue.”

—Staff writer Virginia L. Ma can be reached at virginia.ma@thecrimson.com.

—Staff writer Kevin A. Simauchi can be reached at kevin.simauchi@thecrimson.com. Follow him on Twitter @Simauchi.

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Central AdministrationFundraisingEndowmentUniversity FinancesHarvard Management Co