Is the ETS really a nonprofit?

The ETS (Educational Testing Service) is the world's largest private testing and assessment nonprofit organization. Some of the tests they administer (out of the 20 million they administer annually) include the TOEFL (Test of English as a Foreign Language), GRE (Graduate Record Examination), Praxis, which is a teacher certification test, and various standardized tests administered to K-12.

However, through for profit subsidiaries, it has grown to a multinational operation and retained a revenue in 1996 of $411 million. In 2007, according to IRS forms, they grossed a profit of $94 million. Since they're technically classified as a nonprofit organization, they avoid paying millions in corporate taxes every year. The standard testing industry is entirely unregulated, except for boards of Trustees. The ETS has a board of sixteen Trustees, each of whom earn upwards of $32,000 annually, even though the IRS asks that the trustees of a nonprofit not be compensated.

"E.T.S. is standing on the cusp of deciding whether it is an education institution or a commercial institution," said Winston H. Manning, a former E.T.S. senior vice president. "I'm disappointed in the direction they have taken away from the education and public service."

The worse offense of this conglomerate was breaking the norm by competing with the private sector for selling test preparation materials. They add to the offense by using slogans aimed at stealing market share by differentiating their product with slogans like, "We prepare the tests, let us help prepare you." Their distinct advantage (the fact that they make all of the test content) in the test preparation market seems extremely anticompetitive. Numerous attempts have been made to bring this to the attention of the government, but none have been successful, as most of their anticompetitive behavior is stemmed out from their supplementary organizations.

So I suppose us undergraduate students seeking higher education have no option for now except to succumb to the monopolistic tendencies of this corporation, as there is no optlet for gaining entry into most graduate programs except for the tests administered by this giant corporation.

(Thanks to Stefan S. for your blog post about application fees and other grad school charges that spurred my research about the ETS.)

http://www.nytimes.com/1997/09/30/us/testing-giant-exceeds-roots-drawing-business-rivals-ire.html