Understanding ISE as an Educational Nonprofit
This page was created to help resolve several myths about the nonprofit Institute for Shipboard Education and Semester at Sea program in hopes of informing key audiences about the Institute’s financial state, current challenges, and opportunities.
Myth 1: Semester at Sea is a for-profit enterprise.
Semester at Sea is a global comparative studies program administered by the Institute for Shipboard Education (ISE), a 501(c)(3) nonprofit established in 1971. The Institute is located in Charlottesville, Va. near the University of Virginia Grounds and employs approximately 40 individuals. Three times each academic year, in conjunction with the University, ISE hosts the Semester at Sea program aboard the floating campus of the MV Explorer. The University of Virginia appoints the academic dean for each voyage, approves course syllabi, and transfers semester credit to participants’ home institutions.
ISE is incredibly proud of its partnership with the University of Virginia, one of the nation’s leading institutions of higher education, but it is important to understand that we receive no financial support from the University. Our working relationship is governed by a contract whereby we pay for University of Virginia services, including our ship-based and online libraries, credit issuance and transfer, program development, and faculty services.
In addition to the Semester at Sea program, ISE provides nonprofit oversight and administration of Enrichment Voyages, non-credit travel and learn opportunities for adults and families, and the annual Forum on Global Engagement, an invitation-only event led by scholars and global experts.
Myth 2: Semester at Sea receives funding from a benefactor.
Semester at Sea is not underwritten by a sole benefactor or by any single individual or agency. In fact, the Semester at Sea program is funded almost entirely by tuition dollars. Unlike many colleges and universities, Semester at Sea does not receive significant revenue streams from endowment earnings.
The Institute continues to engage the C.Y. Tung family of Hong Kong, a family and organization that has played a pivotal role in our history. C.Y. Tung is the shipping businessman who founded the original University of the Seven Seas program in 1963. Until 2004, the Tung family managed a lease agreement for Semester at Sea’s ships as well as supplemented under-enrolled semester voyages (they do not financially support the general operations budget of the program at this time). The Tung family continues to be involved in Semester at Sea program. They recently provided a gift to establish the C.Y. Tung Program in Sino-U.S. Relations and C.C. Tung serves on the ISE Board of Trustees.
Myth 3: Semester at Sea owns a ship so it must be a wealthy program.
It is true that the MV Explorer is one of the most remarkable college campuses in the world; however, we are still paying for this long-term investment in our future.
For almost 45 years, the Institute never owned its own campus. The C.Y. Tung family of Hong Kong provided this essential service in the early years of Semester at Sea and during the 1990s and 2000s, ISE leased vessels from companies including Royal Olympic Cruise Lines. In 2004, the Institute established a 15-year lease of the MV Explorer with the German banks that had seized the ship from its original owners, who had declared bankruptcy.
It was critical for the Institute to have a ship that was properly upgraded for the new, required health and safety codes that would take effect in 2010. The MV Explorer, built in 2002, was a modern ship that would not require millions of dollars for essential safety repairs.
When the opportunity arose to purchase the MV Explorer in December 2007, the ISE Board recognized the financial gain, future stability, and new capital asset could not be passed up. It is significant to note that the Institute did not put down any money at the time of purchase because it did not have it. The German bank loaned the Institute $83.5 million and a payment system was established. The loan payments for the MV Explorer were actually lower than what ISE was paying in lease payments. The market value of the ship was assessed at $115 million at the time of the purchase.
The ship purchase has enabled the Institute to be in its strongest financial position in its history, and with the ship as our asset, we have the capacity to build for the future. Along with this asset comes significant financial responsibility. As of January 2011, the Institute owes the German banks more than $70 million, and importantly we have a $900,000 balloon loan payment due in December 2011 and a $2.5 million balloon payment due in December 2013. Payment for these balloon payments are expected to be funded through contributions.
Myth 4: Semester at Sea has a large endowment.
ISE’s unrestricted reserves are approximately $5 million. This means that if we had to cease operations for any reason due to a global event or crisis, we could operate for approximately 2 months and then we would have to close our doors. Compared to liberal arts colleges of our size, this amount is inadequate. It is the goal of the Board of Trustees to grow our unrestricted reserves to at least $15 million so we have much more protection to handle global shocks and to provide much more in scholarships and higher faculty salaries.
The Institute for Shipboard Education’s goal is to be the best at what we do. We strive to be at the top of global education, educating leaders in an interconnected world. And we want more international students and a more diverse student body. To reach the top we need money: to provide more scholarships, establish new programs, do research, and pay faculty more competitive wages.
Myth 5: There isn’t much I can do to help ISE’s financial situation.
This may be the biggest myth of all. We need your help in three distinct areas. First, we need you to make Semester at Sea a philanthropic priority in your household through the SAS Annual Fund. Second, we need you to refer students and lifelong learners to our various voyages and programs. Third, we need your ideas and connections. We continue to look for strategic partnerships that will support the work of our mission while complementing our financial needs. At present, ISE has no foundations to fund our mandate and no corporate relationships to financially support us. We must improve this. If you have contacts with corporations or foundations that could benefit from a relationship with the greatest shipboard education program in the world we want to hear about it. With the gifts of your treasure, time and talent, ISE’s future, and the future and mission of shipboard education, will continue to change the lives of today’s students and to unite people around the world.