Behind the scenes - Annual Financial Report

Yale recently published the fiscal year 2023 Annual Financial Report. While many of us rely on the financial statements included in the annual report, only some of our staff are familiar with the overall process and the individuals who contribute to it every year.

Design work for the annual report spans the front and back covers and the feature located at the end of the report. These pages require significant coordination between the financial reporting team (thank you to Mike Damone Jr., who led the charge this year!), senior leadership, and Yale Printing and Publishing. Gathering photos for an identified theme began in April, and designs were worked on and reworked until early October when all the pictures and captions received final approval. This year’s cover theme focused on the Sciences - Planetary Solutions, Neuroscience, and Kline Tower, including the new Institute for Foundations of Data Science. The feature at the end of the annual report highlighted The Jackson School of Global Affairs, which became a stand-alone professional school in Fall 2022, the first in more than four decades. On the first page, we find the Highlights section, which incorporates a five-year trend of significant data, including total assets, liabilities, operating revenues, operating expenses, and enrollment. Nicole Rodier is responsible for the content on this page. 

The beginning of the annual report includes two messages from leadership: the first from President Peter Salovey and the second jointly authored by the Senior VP of Operations, Jack Callahan, and the VP of Finance, Steve Murphy. These letters broadly discuss the year’s successes with a particular focus on academic priorities and operations strategy. A special thank you goes to Mike Jarosz, who assists with the letter from Jack Callahan and Steve Murphy.  

The Management Discussion & Analysis section follows (pages 6-18) and includes information on Management View results, GAAP results, the differences between Management View and GAAP, capital projects, and the endowment. Chris Bancroft coordinated this section and worked with several other teams to gather the necessary information.

The following few pages of the annual report include a letter signed by Steve Murphy and Shannon Smith, University Controller, which articulates management’s responsibility over the integrity and reliability of the financial statements, as well as an unmodified (clean) opinion on our financial statements from our external auditors, Pricewaterhouse Coopers. 

The university’s Consolidated Financial Statements appear after the opinion; these are the reports we all know and love! The Consolidated Statements of Financial Position highlight assets, liabilities, and net assets. One interesting note is that Yale achieved a 1.8% positive return on the endowment in fiscal year 2023, while many of our peer institutions experienced lower or negative returns. We are lucky to have a great investments team supporting the university!  The overall investment balance did decrease because of spending (the transfer of funds from the endowment to the operating budget), outpacing the return for the year and new gifts received. The Consolidated Statement of Activities displays the university’s revenue and expense streams, as well as non-operating activity. Although operating revenue grew by 6%, expenses also grew significantly by 9%. The increases in revenues and expenses represent continued growth across most revenue sources, including an increase in on-campus activity after the pandemic and the inflationary environment, which led to slightly lower operating income than we experienced last year. Non-operating activity consists largely of the spending distribution and gains in both pension and postretirement plans and liabilities associated with interest rate swap agreements, which were positively impacted by a higher interest rate environment. 

The Consolidated Statements of Cash Flows is our third primary financial statement, followed by our notes to the financial reports, which should be read in conjunction with the Consolidated Financial Statements. Yale’s President, Fellows, and Officers are listed on page 60. 

The overall process of calculating the numbers, facilitating the audit of the financial statements, writing the descriptions, formulating the tables, ensuring everything is cohesive, and turning it all into a book, equates to a lot of work in a short amount of time! It requires coordination and collaboration from individuals across campus and several external parties. We want to thank everyone in Finance who supports us in creating the Annual Report! A special thank you goes to the financial reporting team: Chris Bancroft, Mike Damone Jr., and Nicole Rodier, who worked tirelessly and seamlessly to finalize the report for this year.  

PS - This article was crafted with artificial intelligence (AI) assistance, showcasing the growing influence of advanced technology tools like ChatGPT in various organizations’ financial reporting processes.