The Ministry of Education (MOE) does not put a cap on the size of the local universities' endowment funds and these are not "excessively large" compared with international universities.
Education Minister Ong Ye Kung said this yesterday in his reply to Mr Ang Wei Neng (Jurong GRC).
He said: "Our universities have started building endowments maybe over the last 20 years or so; compared with international universities, their endowments are not excessively large at all. In fact, many international universities have endowments much bigger than them.
"More importantly, the income from endowment funds is put to good use... as long as donors are prepared to part with their donations to support the institutions, we should encourage that."
He did not name any international university, but Harvard University in the United States reportedly has the world's largest endowment for universities, with US$39.2 billion (S$55 billion) in the financial year ending in June last year.
Mr Ang had asked Mr Ong about the size of the six local universities' endowment funds and details of their use. The issue hit the headlines when a series of reports by The Straits Times on the 10 wealthiest charities here in terms of donations showed that the National University of Singapore (NUS) was the most successful fund-raiser here.
The university collected $227 million in donations and had $9.5 billion in reserves in the financial year ended in March last year.
There were a few letters to The Straits Times Forum page on the topic, among which was one by a reader who asked if there was a limit to NUS' fund-raising ambitions.
The NUS endowment fund is the largest among the six local universities: $5.9 billion in the financial year that ended in March last year. It is followed by the Nanyang Technological University at $1.9 billion and the Singapore University of Technology and Design at $1.1 billion.
Next is the Singapore Management University at $1 billion, followed by the Singapore Institute of Technology and the Singapore University of Social Sciences at $400 million each.
Mr Ong explained that reserves are operating surpluses that are accumulated over the years and are typically tied up in assets, which can be in the form of buildings and long-term investments.
"What is pertinent is the use of endowment funds," he said. "The autonomous universities set up endowment funds, with government support, because they should have a separate stream of income such that they can embark on programmes and activities without always depending on the Government."
He explained that the endowment fund is invested and only a portion of the returns is spent. The rest are re-invested.
For endowment funds, the principal sum cannot be touched and only the income generated from investing the sum is used.
Mr Ong said the biggest use of the endowment income is to pay for delivering subsidised education.
Other major uses include giving bursaries and scholarships, funding research projects and supporting students' overseas internships and programmes that enrich their learning experience.
He added that MOE also contributes to the endowment funds by matching donations the universities raise.
Last week, NUS said it spent about $230 million in investment returns from its endowment fund and from non-endowed donations on operating expenditure for education, among other things, in the financial year ended in March last year.
Mr Ong said: "It is common practice internationally for universities to build up their endowment funds through donations to support students and activities outside of education, such as research and enterprise."