Is UT sitting on a pile of cash? Not exactly.

Back in March, Yahoo Finance published an article listing the 10 richest colleges in America. The piece was based on the latest comprehensive endowment study from the National Association of College and University Business Owners (NACUBO). The article stated that, as tuition costs continue to increase at universities across the nation, "some colleges are sitting on mountains of cash." The University of Texas system came in third with an endowment of more than $17 billion, making it the richest public university in the U.S.

While the article referred to the University of Texas System, it showed a photograph of the UT Tower and mentioned the number of students enrolled at UT Austin for the Fall 2011 semester. Those two elements lead to confusion.

If UT is sitting on so much cash, then budget cuts and tuition increases would make no sense. However, the article failed to clarify some important points. This prompted Kevin Hegarty, Vice President and Chief Financial Officer of The University of Texas at Austin, to write a letter to the author of the article. According to Hegarty, the first problem with the article was that UT Austin and the University of Texas System were being used interchangeably.

"The University of Texas System consists of 9 academic and 6 medical campuses," Hegarty said. "The endowments cited of $17.1 billion are for all those campuses. UT Austin benefits from about $6 billion of endowments, which is generous, but a far cry from $17.1 billion."

Besides using the terms interchangeably, the data reported took into consideration the 51,112 students at UT Austin, not the total number of students in the University of Texas System. Hegarty said this lead to a unrepresentative appearance of wealth.

"The assessment of 'richness' is misleading because it does not take into account comparative data that has any meaning in determining 'richness'; comparing endowment balances on a gross basis not normalized for any basis is meaningless," Hegarty said.

Hegarty showed that the way the data was presented considerably inflates the amount of money that the endowment might apply toward the education of each student. The $17 billion that is attributed to the University of Texas System is divided by the total of students at UT Austin (51,112) and not by the total of students in all the campuses that make up the system (161,275), making it seem like the System has $0.3 million of endowments per student rather than $0.1 million.

The "richest" university on the list, Harvard, has only 21,000 students with a $31.7 billion in endowment fund,making it $1.5 million per student. Then Yale, ranked second, comes in at $1.6 million per student with a $19.4 endowment and 11,875 students.

"Normalizing endowments based on the number of students may seem trivial, but when one considers that an institution can only spend a modest return on the endowment principal, typically five percent, knowing that Harvard and Yale would have something around $77,500 per student of endowment income and the UT system and UT Austin would have $5,600 per student, is critical to assessing how rich' each institution might really be on a relative basis," Hegarty said. "Clearly there is a world of difference in the situation at Harvard and Yale compared to The University of Texas system and the University of Texas at Austin."

The article also mentioned that tuition cost for the 2011-2012 school year is $9,816 for residents and $32,594 for non-residents. However, Hegarty explained there are two things that need to be taken into account when discussing funding for UT. The first is that UT Austin has a $100,000 endowment principal per student, but the amount actually spent per student per year is only the five percent return on that. Also, the cost of education was not mentioned anywhere.

"A regular UT student pays about $10,500 for tuition each year, but that's not the cost of delivering the education to each student," Hegarty said. "The cost of delivering that education is about $28,000 per year for each student. Who pays for that difference? It's coming from these generous endowments."

Generous as they may be, another crucial point left out of the article is the purpose of most endowments.

"The vast majority of people give to the university for very specific purposes," Hegarty.said. "The money usually goes to endow a chair or to scholarships."

Hegarty's words were echoed by Kenneth E. Redd, Director of Research and Policy Analysis at NACUBO.

"It is important to note that many institutions have donor restrictions on their endowment, which means they can be used for only very specific purposes," Redd said. "For example, a donor may endow a scholarship for students, which means that the funds generated by this endowed fund may only be used for scholarships. Other donors endow funds for research and other purposes, which again means that there is much less funding for 'unrestricted' purposes, particularly at large endowments."

All of the above goes against what the article established. However, the original NACUBO study is not to blame. Redd explained that the endowment market values that were reported are for the University of Texas Management Company (UTIMCO) include the combined endowment for all the institutions in the University of Texas System. The study didn't mention UT Austin.

Also, according to Redd, there are two very important elements of the NACUBO report that the Yahoo Finance article seemed to miss: that the $17 billion mentioned in the study is not necessarily money and that the total reported is estimated based on the market value of a number of things that include buildings, bonds, trees, and stocks, to name a few.

"All the data that we report are self-reported data based on information given to us as of June 30, 2011," Redd said. "The endowment market values include both liquid assets (stocks, bonds, and cash) and 'illiquid' assets such as real estate, venture capital, natural resources, etc. The values reported are estimates based on the market values of these assets as of June 30, 2011. Market values fluctuate daily so more recent data will have different information than what we report."

Saying the University of Texas System, or UT Austin, is sitting on "mountains of cash" is simply incorrect.

"At many large institutions, roughly 60 percent of the endowment will be in 'illiquid' assets so the figures we report do not necessarily imply that the endowment has ready 'cash' to spend,'" Redd said.

The University of Texas System is compromised of 15 campuses and there is no doubt that it is the richest public university in the nation. However, within each campus there are many departments and schools and each has to deal with endowments in their own way.

Furthermore, not all assets owned by the UT System are readily available as money can be used in ways that directly affect students or tuition. While there are issues that need to be fixed on a macro and micro level, it is clear the neither the UT System or UT Austin are sitting on piles of cash while raising tuition.