School Finance 611: SAS Financial Reserves: Ensuring Our Stability

For many years, SAS has maintained financial reserves with the goal of ensuring our long-term stability and continued success. In the last year, the school board has reviewed how we organize, allocate, and invest these savings, and has combined them into a single pool called the endowment. This week we would like to explain these changes so that our community understands this important component of the school's financial health.

Previously, we maintained three separate reserve funds, each invested differently to meet different goals. The board decided that this was unnecessarily cumbersome and consolidated these monies into one fund. This fund is still split into several categories, as seen below, each with its own intended focus and use. However, all the money is now invested in the same way.

Endowment Balance
(as of December 31, 2016, Singapore dollars)

The money in what we now call our endowment is reserved for use in an emergency or to meet long-term challenges. SAS exists as an independent entity in Singapore, without backing from any owner, parent company, government, or religious sponsor. Because the school must be ready to cope with unexpected situations and significant challenges entirely on its own, it maintains adequate reserves in the endowment.

Looking at the chart, each "piece of the pie" addresses one of the school's long-term financial priorities. The operating reserves are intended to protect the school in unexpected circumstances by maintaining sufficient funds to meet our financial obligations for a period of six months. Although Singapore is politically stable and generally free from natural disasters, we must be prepared for the unexpected. An epidemic, a financial crisis, regional political turmoil, or terrorism could all result in SAS families leaving suddenly. Meanwhile, the school would be obliged to meet its operating and upkeep expenses and honor financial commitments to employees and contractors. Our operating reserves would help us cover any shortfall in collected fees.

The facilities reserves are intended to meet long-term facilities needs. To preserve and maintain our impressive but aging Woodlands campus, we earmark these funds for renewal and building projects. Major projects—renovating gyms, libraries, cafeterias, and theaters, or building additional learning facilities—cost more than could be covered by the annual budget, and would require dramatic rises in the annual facility fee. Instead, we set aside some money each year, and when a large project is necessary, we can fund it without dramatic fluctuations in school fees.

The "campus replacement and program support" piece refers to what we previously termed our Endowment Fund. We set this money aside for eventual campus replacement and to earn returns to support SAS programs. With this portion of our reserves having reached its intermediary target of $50M last year, for the first time we have allocated $1 million of the proceeds to program support for 2017-18. "Named funds" refers to philanthropic gifts donated for specific purposes.

The consolidated endowment continues to be overseen by our Investment Advisory Committee (IAC), which ensures that it is managed in accordance with our strategic objectives and our investment policy statement (see specifics about the IAC and its role here, under "Board Committees.") We invest the money in five asset classes; our investment horizon is long-term, and we aim for steady growth with low-to-moderate risk.

Strategic Asset Allocation
(approved and adopted by the board in September 2016)

We update the SAS community about our investment performance twice per year, at the annual general meeting in October and at the budget presentation in January. The following chart shows our investment performance since 2008. Events of significance include the financial crisis of 2008; the creation of our Facilities Reserves Fund in 2010; the adoption of an investment policy statement (IPS) and strategic asset allocation (SAA) in 2011 (revised in 2013 and 2016); and the consolidation of the funds in 2016. We keep a close eye on the benchmark returns, which help us reconsider our investment approach as needed. We are pleased to note that we are now in the fifth consecutive year of positive financial returns on our investments.

Investment Returns, 2008-2016

The SAS school board periodically commissions studies and stress tests to ensure that our reserves are sufficient to meet expected long-term needs and unexpected emergencies. Working with risk-management professionals, we keep our contingency plans up-to-date and stay abreast of relevant trends and situations. We hope this article clarifies the financial measures in place to help SAS meet future challenges. As always, please send comments, questions, and suggestions for future articles to We look forward to hearing from you.