ETS Creates For-Profit Spinoff

Status: 
Archived
Subject: 
University Testing

The Educational Testing Service (ETS), which long boasted about its non-profit status, has quietly launched a for-profit arm to handle much of the parent company s employment testing business. The wholly owned subsidiary, which began operating on January 1, 1996, is called The Chauncey Group International, after ETS first president Henry Chauncey. Alice Irby, former head of ETS Center on Professional Assessment (COPA), is the new firm s chief executive officer.

 

The Chauncey Group will take over such ETS products as the Armed Services Vocational Aptitude Battery (ASVAB), the Test of English for International Communications (TOEIC), and certification tests for architects, nurses, pharmacists, financial planners, accountants, and many other occupations. Some related exams, including the Praxis series of teacher licensing tests and the Test of English as a Foreign Language (TOEFL) remain at ETS, at least for the immediate future.

 

Profits from The Chauncey Group will be returned as dividends to its sole shareholder, ETS, further enriching an already wealthy entity. According to a public copy of ETS organizational tax return for its fiscal year that ended on June 30, 1995, annual corporate revenues before the spin-off were more than $380 million with income exceeding expenses by $4.8 million. The largest income sources were College Board programs the SAT and related admissions products which brought in $134 million, and graduate school testing at $68 million. Government grants totaled almost $20 million. Revenue data for the tests being transferred to The Chauncey Group were not separately reported, but ETS did report $23 million in unrelated business income from its professional certification programs.

 

These huge flows of cash, largely from the pockets of test-takers and taxpayers, subsidize a very generous salary structure and corporate lifestyle. ETS President Nancy Cole received total annual compensation of just under $339,000 plus use of the manor house on the former horse estate where the company is located in Lawrenceville, New Jersey. Vice President Robert Altman received even more salary and benefits, $358,000, but no housing allowance. Three other ETS officers broke the quarter million dollar a year level, and a total of 749 employees exceeded $50,000 annually.

 

Substantial funds are also spent on consultants, many of whom help promote unnecessary tests or fight against test-takers rights. For example, the four top legal firms used as outside contractors received a total of $1.2 million, in addition to the $3.6 million ETS spent on internal attorneys.

 

The creation of The Chauncey Group may well increase all these figures. Freed from Internal Revenue Service rules governing the amount of unrelated business income a non-profit may earn and ETS own relatively generous pay scale for support staff, the new subsidiary could boost prices and slash wages to position itself more profitably in the marketplace.

 

No matter what the form, profit-making or technically not for profit, testing remains a very healthy industry, at least for those who work for it.