Universities, colleges and independent schools around the world operate with a financial model similar to that of HKIS, whereby tuition is deliberately set below the cost of educating a student. Gifts to the Annual Fund are directed to the current operating budget unless otherwise directed as restricted funding per the donor. 80% of Annual Fund proceeds go to fund current year operational needs while 20% is invested in an endowment for future needs. Interest income is spun off of the endowment yearly and directed to the current year operating budget. There are many reasons why this model is so prevalent:
By providing an alternate source of income from tuition, the Annual Fund provides HKIS with the financial flexibility to operate with a balanced budget. Financial flexibility means the school does not have to rely on tuition increases when making adjustments to staffing, programs, infrastructure, etc. The endowment allows the school to build a financial foundation upon which it may rely on in times of need or opportunity. HKIS is a non-profit organization. Contributions to the Annual Fund offer a tax benefit to donors and as well as the school. Tuition payments are not tax-creditable for parents/corporations and tuition income is not tax-creditable for HKIS.
Annual Fund contributions keep tuition increases at a minimum for every student. Because the operating budget receives supplemental income from both the Annual Fund and the endowment, the tuition required per student is reduced and relatively stable. These savings are critical. First, we know that over a third of our families pay their own tuition. Many families make serious sacrifices to pay tuition. Therefore, keeping tuition low contributes to the diversity of our student population. Second, corporations benefit from lower tuition as it allows them to manage their compensation and benefits costs.
100% of Annual Fund contributions remain with HKIS. Our endowment is managed by a committee comprised of HKIS community members. Our school does not provide funds to, or receive funds from, any religious or civic organizations. Similarly, we do not receive funding from the United States or Hong Kong governments. Our schools is entirely self-sustaining and relies upon tuition income, Annual Fund contributions and endowment interest income for its operations needs.