Trustees Talk Aid, Endowment

Last weekend, Phillips Academy’s Board of Trustees convened for one of its three yearly meetings. During the Trustee Meetings, subcommittees discussed issues such as Andover’s endowment, financial aid and construction. Finance Committee & Compensation Committee At last weekend’s meetings, the Board of Trustees expanded the financial aid budget, approved a raise in compensation for faculty and staff and approved an increase in tuition for the 2008-2009 school year. Final approval of the budget is expected at the next Trustees meeting, during Spring Term. The increase in financial aid funding will support Andover’s new need-blind policy, which promises to meet all demonstrated financial need of admitted students. This weekend was the first time that the full Board of Trustees has convened since the need-blind announcement in November of 2007. According to Director of Financial Aid James Ventre, the financial aid scholarship budget allocation for the 2008-2009 academic year is $14,557,000. Said Stephen Carter, Chief Financial Officer, “I’d say this year the emphasis is on financial aid.” “It’s a challenge, but it’s not a difficulty [to fund financial aid]. We’re planning to raise the increment of money through fundraising. We’re going to bring the money in this year by June 30 to fund the financial aid increment starting in September, and we’re in the process of doing that right now,” Carter said. Furthermore, the faculty and staff compensation levels grew to reflect the rising rate of inflation and based on a comparison with Phillips Academy’s peer schools, according to Carter. The exact numbers for the increased tuition and compensation for faculty and staff salaries cannot be publicly released yet due to antitrust laws, which require all schools to set their tuitions and compensations independently of each other in order to maintain a fair marketplace for private schools. According to Carter, all of these decisions are based on a financial model for the school’s budget and priorities. “We model what the proposed increases are going be in the tuition, financial aid, compensation, energy, and so on. We run it through the model and we see how much the endowment can contribute,” said Carter. “Based on that, we adjust other things in the budget.” Building Committee The Board of Trustees approved the construction plan for the expansion and renovation of the Addison Gallery of American Art. The renovation includes “the first green roof [in the town of] Andover,” according to Director of Facilities Michael Williams. According to Carter, Phillips Academy has raised $19.4 million of its $30 million fundraising goal for the Addison expansion. That total includes $6 million pledged by President of the Board of Trustees Oscar Tang ’56 at the most recent meeting. Of the $30 million, $22 million will fund the newly approved construction while the remaining $8 million will go toward the Addison’s endowment. The Board of Trustees first approved the schematic and conceptual plans for the Addison renovation in the spring of 2006, after which they hired Centerbrook Architects and Planners to design a sustainable structure. In the next phase, the Addison will transition from design into construction. A contractor will use the architect’s drawings to begin the construction that is scheduled to begin in late summer. The gallery will close in July 2008. The proposed roof will be covered in vegetation to improve the energy performance of buildings and reduce storm water runoff. The Board of Trustees also authorized a land swap with the Town of Andover, which will allow Phillips Academy to obtain property near Borden Gym and Graves Hall. This proposal requires approval through a town meeting in April and will then proceed to the state legislature. Endowment Despite recent turbulence in the stateside and worldwide economies, Phillips Academy’s endowment has not been severely affected, as the Board of Trustees learned this past weekend. Chief Investment Officer Amy Falls ’82 and Treasurer of the Board Thomas Israel ’62 presented the Trustees with a brief report on the endowment’s performance, including a review of the results since ending the previous fiscal year on June 30, 2007. Tang said, “We were all very interested in how the endowment has performed since then [the end of the fiscal year] because since then is when the markets became very volatile.” Tang said, “The preliminary results were favorable but not nearly as strong as the prior year, so this is something of concern to us. Since December 31, which is when we got all the [preliminary] numbers, January has been a bad month, so we are very concerned about that.” Carter said, “We’ve done better than the market; we haven’t gone down as much as the market. We’ve gone down a little, but we’ve come back up.” According to Carter, the endowment is structured so that when markets drop, the endowment will not be impacted as negatively. “In January, the U.S. market went down, the developing markets went down in the world, and the emerging markets went down too. Everything went down in the same direction, so that wasn’t too good. But bonds went up a little bit and some of our hedge funds dampened the volatility,” he continued. “Essentially, we were up from July 1 to December 31, then we went down, and then we came back up only recently. We’ve just started to get reports of where we are as of January 31. So in the next few days we will be getting more reports on how we did,” said Carter. In addition to discussing endowment performance, the trustees also discussed endowment spending. Phillips Academy currently spends around 5.4 percent of its endowment, based on a three-year moving average of numbers for the endowment, according to Tang. Audit Committee The Audit Committee convened during the Board of Trustees’ weekend meetings to discuss Phillips Academy’s search for a new auditing firm. Phillips Academy, a non-profit organization, contracts services from PricewaterhouseCoopers, the world’s largest firm of accountants. However, “PricewaterhouseCoopers decided to move onto greener pastures,” said Carter. “It had nothing to do with our status of our books or anything. It had to do with the fact that they’ve gotten incredibly busy in the for-profit sector and they don’t have the personnel to do as much of the not-for-profit work as they have in the past.” “They’re actually dropping a lot of their not-for-profit clients. We don’t produce enough fees for them to be a huge client that they want to be servicing. The amount of service they have to give us is more than they make,” continued Carter. Phillips Academy will be moving to a new firm next year, Carter said. The school is currently looking at a number of auditors that are making proposals due this week.