2020 Annual Report

Financial Report 2019–20

As a result, WFAA finished the year with lower figures than in 2018–19 for contributions and for funds transferred to campus. Cost of raising a dollar increased from 12.7 cents to 15.8 cents. Still, net contributions were more than $250 million for the eighth straight year, and the rapid recovery of the stock market helped improve the value of the endowment. As state dollars make up about 14 percent of UW–Madison’s budget, philanthropy plays an increasingly important role in the university’s financial health. The gifts that alumni and friends contribute through WFAA will provide a vital source of funding to help the university realize its plans in the years ahead.

From a financial standpoint, the 2019–20 fiscal year can be divided into two parts: from July 2019 through February 2020 — that is, before the pandemic disrupted campus — and from March to June 2020. Before COVID-19 arrived in Madison, WFAA was on track to celebrate a successful year: in October, the All Ways Forward comprehensive campaign surpassed its goal, more than a year ahead of schedule; the stock markets started 2020 at record highs, carrying the value of the endowment upward. After March, WFAA had to change its strategies, halting several solicitations as the nation withstood the twin shocks of the health care and financial crises.

Photo by Bryce Richter, University Communications

Statement of Financial Position

ASSETS

JUNE 30, 2020

JUNE 30, 2019

Cash and cash equivalents

55,488,244

14,352,673

Income and redemption receivables

81,080,794

61,322,010

Pledges receivable, net

99,533,804

105,016,732

Investments

4,168,998,081

4,157,753,513

In 2019–20, WFAA’s total assets increased by $65 million, and liabilities decreased by $16 million.

Property and equipment, net

15,075,585 11,717,002

17,055,651 10,828,160

Other assets

TOTAL ASSETS

$4,431,893,510

$4,366,328,739

LIABILITIES

JUNE 30, 2020

JUNE 30, 2019

Pending investment purchases payable Liability under split-interest agreements Funds due to other organizations

54,219,318

82,648,552

41,598,000

42,673,164

290,366,846

287,886,482

Other liabilities

23,045,320

11,994,520

TOTAL LIABILITIES

$409,229,484

$425,202,718

NET ASSETS

JUNE 30, 2020

JUNE 30, 2019

Without donor restrictions With donor restrictions TOTAL NET ASSETS

179,646,343

163,258,592

3,843,017,683

3,777,867,429

$4,022,664,026

$3,941,126,021

TOTAL LIABILITIES AND NET ASSETS

$4,431,893,510

$4,366,328,739

Statement of Activities

REVENUE, GAINS, ANDOTHER SUPPORT

2020 (7/19–6/20)

341,625,459 148,530,807 2019 (7/18–6/19)

Contributions

304,160,374

Investment return, net of fees

63,923,526

Other income

5,504,482

5,447,052

In a year affected by the pandemic, WFAA saw a smaller total in contributions and lower investment return than in the previous year. However, WFAA’s net asset balance still increased by more than $81 million, improving the Foundation’s net assets to a value greater than $4 billion for the first time in its history.

TOTAL REVENUES, GAINS, AND OTHER SUPPORT

$373,588,382

$495,603,318

EXPENSES

2020 (7/19–6/20)

2019 (7/18–6/19)

Payments to or for UW–Madison

243,943,131

275,391,164

Administrative expenses TOTAL EXPENSES

48,107,246

44,265,598

$292,050,377

$319,656,762

NET ASSETS

2020 (7/19–6/20)

2019 (7/18–6/19)

Increase in net assets

81,538,005

175,946,556

Net assets at beginning of year

3,941,126,021

3,765,179,465

NET ASSETS AT END OF YEAR

$4,022,664,026

$3,941,126,021

Expenses

TOTAL ADMINISTRATIVE AND INVESTMENT EXPENSES

22,035,562 4,876,342 2,075,234 2,280,806 1,974,693 2,002,324 1,926,757 1,607,734 1,987,071 2019 (7/18–6/19)

25,526,956 5,323,079 2,359,305 2,281,317 2,163,068 1,976,290 1,843,857 1,805,144 1,710,704 1,176,565 1,016,929 2020 (7/19–6/20)

Salaries

Like most charitable organizations, WFAA measures its ratio of expenses to contributions to demonstrate that it is properly managing resources. Our focus is not only on keeping costs low but also on maximizing support, which we measure in net contributions. The tables at right track expenses and compare them to new gifts and pledges over the last decade, from January 2011 through June 2020. In 2016, WFAA changed its reporting cycle from calendar year to a fiscal year that begins on July 1, as part of the reorganization following the merger of the UW Foundation and the Wisconsin Alumni Association. Below is a chart showing net contributions. While the cost of raising a dollar is calculated as a percentage — expenses divided by total contributions — net contributions are calculated

by subtracting expenses from total contributions. Net contributions show in raw dollars how much WFAA has raised in each year. Note that we have annualized the figures for the 2016 six-month fiscal year adjustment. During UW–Madison’s All Ways Forward campaign, WFAA has seen an increase in both its expenses and in value generated. WFAA has expanded efforts that invest in advancement and engagement for the UW, as well as in support of the campaign itself. In return, contribution revenue has grown rapidly, and the campaign surpassed its goal in October 2019. The campaign was originally scheduled to close at the end of 2020, but due to the pandemic, WFAA decided to extend the campaign by a year, in hopes that post-pandemic giving would help the university address pressing needs.

Employee benefits

Information technology

Depreciation

Conferences, conventions, and meetings

Office expenses

Advertising and promotions

Payroll taxes

Professional services

Bad debt expense (unfilled pledges)

580,776

Occupancy

1,039,264

Travel

527,569 393,981

613,959 361,327 897,841

Insurance

Income taxes

(400) 2,882

Other

5,908

TOTAL

$48,107,246

$44,265,598

ADMINISTRATIVE EXPENSES AND CONTRIBUTIONS, 2011–20

COST OF RAISING A DOLLAR

ADMINISTRATIVE EXPENSES (excluding investment expenses)

ROLLING FIVE-YEAR AVERAGES

(as a percentage of contributions)

TOTAL CONTRIBUTIONS

NET CONTRIBUTIONS

ENDING IN YEAR SHOWN

2020 2019 2018 2017 2015 2014 2013 2012 2011

48,107,246 43,367,757 45,552,238 49,281,002 21,927,288 45,794,113 36,855,944 28,452,725 30,583,644 29,663,375

304,160,374 341,625,459 313,184,081 338,449,963 151,643,056 543,596,612 380,492,270 266,855,030 211,288,562 197,541,841

15.8% 12.7% 14.5% 14.6% 14.5%

256,053,128 298,257,702 267,631,843 289,168,961 129,715,768 497,802,499 343,636,326 238,402,305 180,704,918 167,878,466

Expenses

Net Contributions

$350 $300 $250 $200

$325.7 $331.5

$322.5

$304.0

$285.7

$274.1

2016 (6 mos)

8.4% 9.7%

$150 $100 $50 0 MILLIONS

10.7% 14.5% 15.0%

$46.0

$45.6

$44.3

$40.8

$34.3

$37.1

2015

2016

2017

2018

2019

2020

Payments to or for UW–Madison

PAYMENTS TOOR FOR THE UNIVERSITY OFWISCONSIN

91,663,742 33,064,170 17,350,773 17,327,655 16,961,988 15,384,339 10,639,661 7,124,120 6,607,026 4,857,504 3,918,493 3,102,825 2,928,703 2,496,498 2,466,006 1,949,071 1,626,769 1,054,976 2020 (7/19–6/20)

108,662,831 37,166,989 23,088,919 20,772,179 10,611,565 15,623,710 11,828,253 2019 (7/18–6/19)

Medicine and Public Health

Letters & Science

Business Athletics

A decline in revenues in fiscal 2020 tracked with a general decline in payments to the various units of UW–Madison, though some areas saw increased payments. Perhaps the most important of these is the Chancellor’s Designated category, which increased by nearly 60 percent in 2020 compared to 2019. These funds were vital in helping campus meet unexpected needs resulting from the pandemic.

Chancellor’s Designated

Engineering

Agricultural & Life Sciences

Veterinary Medicine

8,857,827 5,866,153 3,485,684 3,035,396 2,869,126 2,857,601 8,740,576 2,414,425 2,326,552 1,728,789 1,296,975 1,332,572

Education

UW Hospital and Clinics

Law School

Research and Graduate Education

Wisconsin Union Human Ecology

Other UW–Madison

Pharmacy

International Studies

Nursing

Nelson Institute — Environmental Studies

911,330 806,617 674,146 587,341 281,352 155,469

Other Non-UW–Madison

690,401 487,544 973,898 118,918 213,926 340,355

Continuing Studies

Libraries

Arts Institute

Student Services Unit Recreational Sports

2,557

TOTAL

$243,943,131

$275,391,164

Endowment Funds

INVESTMENT PERFORMANCE ANNUALIZED RESULTS AS OF JUNE 30, 2020

ASSET ALLOCATION

AS OF JUNE 30, 2020

61.6% Global public equity 15.4% Global fixed income 12.5% Private equity 5.8% Real estate 4.1% Opportunistic alpha 0.6% Cash/other

Net of external manager fees

1 year 3 years 5 years

1.22% 5.03%

Endowment funds provide a base of assets from which the University of Wisconsin may draw current and future revenues. WFAA staff and the investment committee of its board of directors manage the endowment fund on a total return basis — they invest the endowment with a long- term perspective and an emphasis on diversified, equity-related strategies. The investment, spending, and expense-fee policies associated with the endowment are designed to provide consistent distributions while enabling the balance to increase at the rate of inflation. WFAA currently allocates the annual income based on a spending-plan rate of 4.5 percent, multiplied by the average market value of the total endowment fund for the most recent 16 quarters. This rate is reviewed annually by the board of directors. The table at right shows the total return figures, and the circular chart shows the asset allocation of WFAA’s endowment fund. WFAA established the endowment fund asset-allocation targets to promote overall portfolio diversification while providing a return necessary to meet the investment objectives.

5.46%

10 years

7.46%

ENDOWMENT FUND ASSETS 2016–20

$3,178,626,769

$3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 0 MILLIONS

6/16

6/17

6/18

6/19

6/20

Planning Your Estate and Supporting the University

NUMBER OF GIFTS RECEIVED JULY 2019 TO JUNE 2020

Bequests, trusts, and insurance

63 26

New gift annuities

Charitable remainder trusts

4

Alumni and friends use planned gifts to create lasting legacies at the University of Wisconsin–Madison. Gift planning integrates charitable giving into a donor’s overall financial, tax, and estate planning to maximize benefits both for the donor and for UW–Madison. Examples of planned gifts include bequests, life-income gifts, gifts of real estate, and gifts of retirement-plan assets. Planned gifts make significant funding available to the university each year, providing crucial support during normal operations and times that are financially challenging. Donors can direct their planned gifts to accomplish many goals. Some deferred gifts are unrestricted, allowing campus leaders to fund the current needs and priorities of the university. Others are directed to specific areas, such as schools, colleges, or departments, or to specific priorities, such as scholarships or faculty support. Some are intended to be used outright, while others establish permanently

endowed funds. When deciding on a designation for a planned gift, donors should consider the delay inherent in planned giving: what will be of greatest benefit to the university when the gift is ultimately received? If you are considering making a planned gift, we recommend that you consult with WFAA’s gift planning team. Staff members are experienced in working with individuals, attorneys, and financial advisers. They can explain how life-income plans work, consult on the type of gift that is best suited to your needs, identify the correct legal names of campus departments and units, and provide language that will carry out your wishes. All individuals with a UW–Madison planned gift in place are welcomed into the Wisconsin Legacy Society — our way of thanking those who have made this philanthropic commitment. No minimum gift is required, and any information shared with us is nonbinding. Current membership includes more than 1,700 individuals.

TOTAL DEFERRED GIFTS

93

2019–20

$344,345 Charitable remainder trusts $6,105,377 New gift annuities

$13,440,322 Bequests, trusts, and insurance