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In the administration of trust funds, particularly permanent endowments, the most vital problem is the sound and advantageous investment of the funds. High-class and long-time securities are preferable to any other type. In the case of a number of the institutions, however, the authorities administering the endowments, whether they be officers of the colleges or State officials are restricted by State laws in the investments and, therefore, have no discretion. According to the reports received, this situation is applicable to eight colleges. The law of one State limits the investment of permanent endowment funds to United States Government bonds, of another to municipal bonds, of a third to Federal and State bonds, of a fourth to municipal and Government bonds, of a fifth to first mortgages and bonds, of a sixth to first mortgages on farm lands, of a seventh to municipal school district, county, or State bonds, and of the eighth to first mortgages on farm lands or State, county, school, and municipal bonds. In 13 other States no restrictions whatever are imposed by statute on the administrators and they are at liberty to invest the funds in such securities as they may select. Eight colleges failed to report on whether restrictions were placed by law on the investment of their permanent endowments. The classes of securities in which the trust funds and permanent endowments are generally invested include mortgages, bonds, stocks, and real estate, although a few colleges have made investments in certificates of deposit, cash bank deposits, and tax certificates. One institution reported that a minor part of its permanent endowment was placed out at call loan. A tabulation of the investment of the trust funds and permanent endowments showing percentages in the different classes of securities is presented in Table 20. The data are based on reports of the colleges,

TABLE 20.—Investment of permanent endowments and trust funds of land-grant colleges showing percentages in different classes of securities

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There are 16 colleges with investments in mortgages. Of this number, one institution has all of its trust funds invested in mortgages, another 97 per cent, a third 86 per cent, and a fourth 52 per cent. The proportion in the remainder ranges from 28 to 0.2 per cent. By far the great majority of the funds have been invested in bonds, 20 institutions having from 100 to 50 per cent and 8 less than 50 per cent. The returns show 10 colleges with 100 per cent of their trust funds invested in bonds, 3 from 90 to 100 per cent, 2 from 80 to 90 per cent, 3 from 70 to 80 per cent, 1 from 60 to 70 per cent, and 3 from 50 to 60 per cent. The institutions with smaller proportions of bond investments include 1 with 46.3 per cent, 1 with 30.5 per cent, 1 with 26.8 per cent, 2 between 14 and 15 per cent, and 2 less than 5 per cent. Only 10 colleges have invested part of their trust funds in stocks, none of which exceeds a proportion of 53.1 per cent found in one instance. The others vary from 40 per cent to 2 per cent, there being 2 with percentages between 30 and 40, 1 between 20 and 30, 1 between 10 and 20, and 4 less than

10. Investments of trust funds in real estate, due in some cases to the fact that they were received in that form from donors, are found in 7 institutions, the proportions being generally small. The percentage in 2 colleges was between 30 and 40, in 1 between 20 and 30, and in 4 less than 10. Trust funds in nine cases have been invested in other revenue-producing sources, such as certificates of deposit, cash bank deposits, tax certificates, and call loans. One institution has placed 85.1 per cent in this class of investment and 2 others between 20 and 21 per cent, while the proportions of the 6 others vary from 16.4 down to 1 per cent.

Notwithstanding the increase in the number of donations and private gifts made to the land-grant colleges from private sources for current expenses, capital outlays, trust funds, and permanent endowments, few of the land-grant colleges have formulated wellorganized plans for their encouragement. Six colleges report that regular campaigns are conducted among their alumni to secure gifts while three others concentrate their efforts on prominent and leading citizens. Two institutions devote their energies to securing gifts from organizations.

Rotary or Revolving Funds

The financial and business operation of certain self-supporting enterprises is greatly facilitated by means of rotary or revolving funds. The cash income of such enterprises should be sufficient to defray the expense of maintenance and operation. In the event of a net profit accruing, the surplus should either be used to extend the plant and improve the service or be turned into the institutional funds as a resource in the annual budget. The different types of enterprises conducted through rotary or revolving funds are residence and dining halls, intercollegiate athletics, hospitals and infirmaries, book stores, laundries, printing shops, and similar services, which are discussed in detail in another part of the report.

Of the 44 colleges submitting reports, rotary or revolving funds are operated in 30. Fourteen institutions report that none is conducted. The establishment of rotary or revolving funds has been authorized by the State legislature in the case of 8 institutions and by action of the governing bodies in 22. General supervision and control over them should be vested in the chief business officer. practice is followed in 18 cases. The governing board, however, exercises direct administrative supervision in one college and the president in five. Six colleges did not report on the officer controlling rotary or revolving funds.

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If this type of enterprises is to be operated, it is important that the handling of business and financial details should not be segregated from the regular institutional organization. Collections, purchasing, payment of bills, and accounting should be handled through the regular channels. Receipts should be deposited in the institutional treasury. It is found that the funds are managed on this basis in most of the colleges, although in eight cases the receipts are deposited with the State treasurer and in two others with a local bank.

Chapter IV.—Business Management, Financial Methods, and Accounting Systems

During the past 15 years business management in higher education has made rapid progress. Educational programs are generally expressed in a financial way in an annual internal budget; the economies and financial control of centralized purchasing are becoming generally realized; and accounting records of assets, liabilities, income, and expenditures are being devised and installed. These instruments of management are not only present in form in many of the land-grant institutions but they are used to further the educational program.

The budget plan, the plan of centralized purchasing, and the system of accounting have been developed, however, not so much "according to the needs of the particular institution" as according to the views of the particular individual or individuals responsible for them. There may not exist one best way, but the present diversity of practice in these fields can not be defended on the basis of particular institutional needs or on the basis of the best methods. Whether they can or not, the fact remains that the many different accounting methods, systems, accounts, and reports make an intelligent comparison of the activities of the several institutions a practical impossibility. Comparative statistical data of teaching costs, for example, compiled from the present accounts of these institutions would be without significance and even harmful in the hands of individuals ignorant of the dissimilarity of practice.

It is for the reason cited that this report will be confined largely to a discussion of the better practices in business organization and methods revealed by the survey. This discussion will cover the preparation and administration of the annual internal budget, the accounting system in all its phases, the necessity of audits both external and internal, the requirements of a good financial report, and the advantages of centralized purchasing, of a central employment bureau, and of controlling property by annual inventories.

Annual Budget

The annual institutional budget has as its objective a distribution of available funds designed to further in an equitable and orderly

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