Financial Report

Despite the challenges of the COVID-19 pandemic, Harvard Medical School is poised to emerge a more financially resilient institution, better positioned to achieve its goals and fulfill its mission. In 2017, HMS had begun steadily reducing cash-flow shortfalls after many years of recurring budget deficits. The School was on track to break even at the end of FY20 when the pandemic began. Just a few weeks into the COVID-19 shutdown, our financial projections changed significantly, and we anticipated potential losses of up to $60 million.

Acting with a shared sense of responsibility, the HMS community responded quickly and decisively. Our campus planning and facilities team made prudent cost-saving decisions regarding renovation and building projects. Our research, education, and administrative departments and units revised budgets, cut expenses, and deferred backfilling of positions, allowing us to significantly blunt pandemic financial losses.

HMS then entered FY21 with a financial plan anchored on three principles articulated by Harvard University leadership: to prioritize community health and safety, to promote teaching and research excellence, and to support our most precious resource—our people. As the year unfolded, it became clear that the School’s investments in technology, its commitment to providing exceptional virtual education experiences, and its community of resilient and passionate faculty, postdocs, students, and staff would lead to financial results much more favorable than estimated at the start of the year.

As documented by generally accepted accounting principles (GAAP), FY21 revenues grew by $23 million to nearly $833 million due to resumption of annual affiliate-hospital contributions, which were forgiven by HMS in FY20. Sponsored revenues decreased by 5 percent in FY21, and spending of grants and contracts at $296 million was effectively flat from the prior year.

Overall, FY21 expenses were level at $765 million, reflecting constrained spending and hiring, as budgeted. GAAP results, which reflect a surplus, include the benefit of donor funds received throughout the year that will be invested in subsequent years.

Taking a more critical reflection on our financial performance, and focusing instead on unrestricted cash flows, HMS ended the year with a $2 million deficit, a strong result considering initial fears regarding the lingering effects of the pandemic. Reinstated support from our affiliated hospitals and growth in master’s and external education programs served to bolster HMS’ revenues. Additionally, support from the University, along with careful budget management, helped to offset the costs of COVID testing, personal protective equipment, and other safety measures.

In keeping with our principles, we continue to invest in our mission, our priorities, and our people. In FY21, we recruited several new faculty members, broke ground on new research facilities, avoided broad layoffs and furloughs, diversified our portfolio of funding sources, and rapidly adopted online teaching and learning strategies that catered to a broader remote universe of students.

To have accomplished all of this in the midst of the COVID-19 pandemic serves as a potent demonstration of the resilience of our community and our return to financial sta¬bility. We are now at a point of greater optimism and renewed enthusiasm for making strategic investments in our community that will enable us to further realize our mission of alleviating suffering and improving health and well-being for all.

—George Q. Daley

FY 2021 Operating Revenue

Research grants and contracts: $293,094,060 (35%)
Endowment distribution for operations $200,542,822 (24%)
Other revenues* $151,288,732 (18%)
Gifts for current use $110,908,205 (13%)
Rental income $44,822,427 (6%)
Tuition (net) $32,321,563 (4%)
Total $832,977,809

*Includes continuing medical education, publications, service income, and royalties

FY 2021 Operating Expenses

Personnel costs $318,170,247 (42%)
Supplies and other expenses $218,806,662 (29%)
Research subcontracts and affiliates $99,986,324 (13%)
Plant operations and interest $80,362,696 (10%)
Depreciation $47,924,239 (6%)
Total $765, 250,168