Financials Report from the Vice President for Finance & Administration & Chief Financial Officer Financial Statements   Financials > Report from the Vice President for Finance & Administration & Chief Financial Officer Report from the Vice President for Finance & Administration & Chief Financial Officer Carolyn Bunker (left) with Controller Stacey Medeiros. (Photo by Tom Kleindinst) The Institution maintained its strong financial position during 2003. Although ocean sciences funding at the federal level was flat, our government-sponsored research revenue increased slightly. This is a tribute to the skill of our researchers, who continue to compete successfully for support despite a difficult funding environment. Financial Position Total net assets increased $50.9 million, from $290.8 million in 2002 to $341.6 million in 2003. Net assets are presented in three categories to demonstrate one significant difference between for-profit companies and not-for-profit institutions. The categories represent the restrictions placed on revenue recognized. Permanently restricted net assets are gifts whose principal can never be spent. They include gifts and pledges to true endowment and assets held in trust, such as life income funds, that will be added to the endowment when they mature or are received. Temporarily restricted net assets are gifts that, after an event or passage of time, can be used to meet operating or capital initiatives. This category also includes accumulated market gains on permanently restricted endowment funds. The Commonwealth of Massachusetts requires that not-for-profit institutions include accumulated market gains on both permanently and temporarily restricted net assets with temporarily restricted net assets. Most other states allow these gains to be included in unrestricted net assets. If the Institution were to follow the prevalent rule, unrestricted net assets would increase by $30.1 million and temporarily restricted net assets would decrease by a like amount. Unrestricted net assets include the remaining financial resources available to the Institution. At year end the Institution had $10.7 million in long-term debt compared with $8 million in 2002. We anticipate that tax-exempt bonds issued by WHOI through the Massachusetts Health and Educational Facilities Authority will finance a substantial portion of the new laboratory space on the Quissett Campus and renovations to existing laboratory space on the Village Campus. Activities Sponsored research revenue released to operations increased to $100.7 million in 2003 compared to $97.5 million in 2002, and government-sponsored research, excluding ship and submersible operations, was $63.4 million compared to $59.1 million in 2002. Total revenues increased 9.4 percent from $123.2 million in 2002 to $134.8 million in 2003. Gifts, grants, and pledges from private sources totaled $23.9 million in 2003, an increase of 73.2 percent over 2002. Outstanding pledges at the end of 2003 were $4.8 million, compared to $4.5 million in 2002. The market value of investments in the endowment increased from $234.6 million in 2002 to $269.3 million in 2003. The investment policy focuses on total return, a combination of capital appreciation and income from interest and dividends. In 2003 the total return on investments was 21.8 percent compared with an 11 percent decline in 2002. Our endowment spending policy preserves the fund’s real purchasing power while providing a predictable stream of income to support annual budgetary needs. During 2003 we distributed $13.6 million of endowment assets: $5.7 million to education, $4.7 million to research, and $3.2 million to other restricted and unrestricted funds. Although the financial results of 2003 were positive, we recognize an increasing stress on our scientists and engineers to secure funding for research. Federal funding, while steady, is not growing, and pension and health care costs are increasing faster than our ability to fund them. The major construction projects planned for the next few years, while providing essential additional laboratory space, will add to the cost of research. However, the Institution is launching a major fund-raising effort to provide broad support for science and education. With additional financial support from private sources and the ability and resourcefulness of our scientists, engineers, students, and staff, we believe the challenges, while difficult, will be met. —Carolyn Bunker (cbunker@whoi.edu) Vice President for Finance & Administration & Chief Financial Officer