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For-Profit and Non-Profit Schools: A View from Singapore American School

By William Scarborough
For-Profit and Non-Profit Schools: A View from Singapore American School

One of the founding principles of Singapore American School is that it is a non-profit institution, existing only to serve and benefit its students. Twenty years ago, almost all international schools were non-profits, but in the last two decades this has changed as for-profit schools began to open, or non-profit schools were bought by profit-making companies.
As the name implies, a non-profit school exists to satisfy its mission, not to make a profit for an individual or company. A school like SAS can also be called an “independent school,” meaning that it is independent of government, church, or an outside company. It “owns itself” and sets its own mission, accepts students based on that mission, hires its own staff to fulfill that mission, and manages its own finances. A school’s non-profit status typically gives it exemptions from various taxes and allows it to accept donations that are also tax-exempt.
A non-profit school is usually governed by a group of current or former parents or other community members who have formed a board of directors (or trustees). The powers of the directors are usually extensive, and include hiring the superintendent or headmaster, setting the school’s educational vision, and directing the school’s financial strategies.
Having such a board allows the non-profit school to outlive its founders, adapt to changing needs, and, if all goes well, last for generations. A non-profit school might, of course, generate a surplus in a given year, but 100 percent of this “profit” must be directed to the non-profit purpose of the institution. In other words, it must be reinvested in the school itself.
A for-profit school, on the other hand, seeks to educate while also making a profit for an individual owner or a corporate entity. It is subject to taxes like other businesses, and the owner makes all major decisions, although the input of staff and parents may be considered. While some for-profit schools are “one-offs” and operate alone, today many for-profit schools are run by large companies, such as Cognita Schools, Knowledge Universe, or GEMS Education.
For-profit schools can often expand and change more rapidly than non-profit schools, as they can approach a bank for a loan or go public to raise money quickly, and make major decisions with little community involvement. The profits benefit the owner or shareholders, although of course these stakeholders can decide to invest such profits in school improvements or expansion.
Until the 1990s, most international schools were non-profits. Typically they were set up, as SAS was, by groups of expatriate parents who wanted an educational alternative that would allow their children to easily continue their studies when the time came to return home.
Usually funds were raised by appeals to the parents of prospective students and to their companies. Sometimes either the home government or the host government was involved. Most of the students who attended such non-profit schools were the children of expats or of parents who had significant experience of the type of education offered, perhaps because they had lived overseas.
In Singapore, besides SAS, other non-profit Foreign System Schools (FSS) include the Tanglin Trust School, United World College SEA, and the German European School Singapore. Our closest “sister schools”—the IASAS schools ISB, ISJ, ISKL, ISM, and TAS—are all non-profit schools that were founded around the same time as SAS.
In the last two decades, however, the international school profile has changed considerably. We are seeing an explosion of new international schools, especially in East Asia, Southeast Asia, the Middle East, and the ex-Soviet nations. Virtually all of these new schools are for-profit schools, although the models vary. Some are one-offs, some are part of large chains of schools, and some are overseas, profit-making arms of non-profit originals, such as Harrow International School Hong Kong and Dulwich College Singapore.
The composition of the student body is also changing: today approximately 80 percent of students at international schools across Asia are locals, when all types of international schools are considered. For-profit FSS in Singapore include Stamford American International School, the Canadian School, GEMS World Academy, the Overseas Family School, and ISS International School. The new schools opening in Iskandar, Malaysia, such as Marlborough College Malaysia and Raffles American School, are also for-profits.
Which type of school is better? Studies seem to be inconclusive: a good school is a good school, whether it is trying to make someone a profit or not. However, there are some differences that are worth thinking about as we consider the rise of for-profit schools:
• The two types of school are governed very differently: a non-profit school is administered by unpaid board members—often parents—who have experience with, and presumably an emotional connection to, the school; a for-profit school is run by a CEO or company that may not have any connection with the actual educational experiences of the students, nor any personal connection to the school.
• These two models of governance mean that a non-profit school’s major decisions are made after discussions involving a large number of people (at least including the board, and often including other interested parties); a for-profit school’s decisions may be made quickly and efficiently, but may not take into account parent and student opinions.
• As they are generally more established and do not seek to make a profit, a non-profit school’s history and reputation are of great importance to its board; a for-profit school may be under considerable pressure to put other considerations above the school’s long-term health and reputation.
• Because the non-profit school’s board has a connection to the school community, it can count on hearing from aggrieved parents when its decisions are not popular; the CEO or company running the for-profit may prefer to let unhappy families go elsewhere rather than consider their complaints.
• A for-profit school might argue that it will be more efficient and will satisfy demand better than its competitors; a non-profit might answer that it can do more with its proceeds, because it need not set aside any amount for the school’s investors, and can focus on educational imperatives rather than the profit motive.
We at SAS feel that our mission—to provide each student an exemplary American educational experience with an international perspective—fits our non-profit ethos. We exist to serve the American community in Singapore and other families who seek an American-oriented education for their children. We do not select based on academic performance, believing that all children have great potential, and that our school will help them to realize this potential. We seek to run our school in a cost-effective and transparent manner, and are confident that we are creating a financially healthy school that will last long after we are gone.
SAS’s non-profit status fits with its students’ engagement in community service projects, with the PTA and Boosters’ volunteer efforts to sell uniforms and provide memorable experiences for students, with the fundraising events that encourage generous donors to support the school, and with the great efforts made by our teachers and staff to make the school what our vision says it should be: A world leader in education, cultivating exceptional thinkers prepared for the future.
William Scarborough is Assistant Superintendent of Finance and Business Operations at Singapore American School.
A version of this piece originally appeared in the series “Finance at SAS,” coauthored by William Scarborough and Cara D’Avanzo as a means of providing information to parents about the financial decisions and procedures followed by the school’s administration.

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02/21/2015 - Andineu5
Just a comment about "non profit" schools - these schools although not driven by profit per say do have to spend considerable energy to fund innovations (e.g construction, new technology). SAS seems to have a solid mission that serves them well as they strive to create the best opportunities for their students. Not all educational institutions have the same safe guards - non profit or for profit schools can pursue cost cutting measures that put the educational goals in jeapardy.



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