The Big 3 Testing Companies enjoy average profit margins that are 62% larger than the 5 largest American nonprofits. Why do they believe it is ethical to earn such huge profits while claiming non-profit status?
Profit Margin (Gross Profit as % Revenue)
Compare to Other Non-Profit Industry Leaders
|Profit Margin||Profit Margin, Compared to Average of 2.7%|
|Catholic Charities USA||4,270||4,280||-10||-0.2%|
|ETS||906||898||7||0.8%||30% of Average
See note to the right
|College Board||623||570||53||8.6%||317% of Average|
|ACT Inc||238||229||9||3.8%||139% of Average|
|Average:||589||566||23||4.4%||162% of Average|
Note: Facts and figures are based on tax filings (IRS Form 990) and company statements for 2009, the most recent records available as of Oct 2, 2011.
ETS's Mysterious Profit Collapse
Soon after we reported ETS's huge 10.7% profit margin in 2008, ETS claimed it had fallen into the red. According to tax filings, ETS experienced a massive 13.2% jump in expenses in the 2008 fiscal year, totaling more than $100 million. This caused its profit margin to collapse from 10.5% in 2007 to -0.3% in 2008. ETS provided no explanation for this change in expenses, which was unusual considering it experienced expense growth averaging only 0.9% in the 3 other reported years since 2006 (2006, 2007 and 2009).
Although ETS offered no comment on this prodigious surge in costs, it appears to have been a permanent change, as the higher level was sustained into 2009. It cannot be explained by changes in the balance sheet, as Assets fell and Liabilities increased. It appears to be largely the result of "Other" expenses of $385,359,907, as ETS cited Other expenses of only roughly $100 million in 2007. This theory is corroborated by the 2009 filing, which indicates Other expenses remaining high at $381,068,630. As a result of this enormous, unexplained jump in expenses, ETS has claimed a profit margin of less than 1% in both 2008 and 2009.