What is a Nonprofit Educational Measurement Organisation?

What Does It Mean to Be a Nonprofit Educational Measurement Organisation in the 21st Century?

ETS Distinguished Presidential Appointee Randy Elliot Bennett focused one of his study on an important question: what it means to be a non-profit educational measurement organisation in the 21st century. Nowadays and mostly in the social service sector, the line between non-profit and for-profit organisation is becoming blurred.

To better understand this study, we need to define the term “nonprofit”. It refers to how an organisation is incorporated under state law. Under the Internal Revenue Code, to be federally tax-exempt, an organisation must be set up exclusively for one or more of the following purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur national or international sports competition, or the prevention of cruelty to children or animals (Internal Revenue Service [IRS], 2003b). An entity meets this organisational test if its articles of incorporation limit its function to one or more exempt purpose (e.g., educational) and does not expressly allow the organisation to engage, other than insubstantially, in activities that are not consistent with those purposes. Moreover, IRS does allow the exempt organisation to engage in activities unrelated to their exempt purposes, but those activities must not become “substantial” and tax must generally be paid on this unrelated business income. The fundamental difference between for-profit and nonprofit corporation is that, for a nonprofit company, no part of the organisation’s net earnings may benefit any private individual. To meet the public benefit test, the organisation must operate to the advantage of public, rather than private, interests. Further, the principal beneficiaries of the organisation’s activities must be sufficiently numerous and well-defined so that the community is, in some way, served.

Prior to the founding of the College Entrance Examination Board (CEEB), admission to colleges and universities in the United States was a disorganised, if not chaotic process (Fuess, 1950). For instance, each Ivy League institutions administered their own tests, which varied widely in subjects assessed, quality, and administration date. To help rationalise admissions, the CEEB was established in 1900. The Board’s initial purpose was to create a single battery of centrally scored examinations and, in so doing, bring order and higher quality to the college preparatory curriculum. From then to 1937, many different solutions have been experimented to solve this issue, hence the creation of the Scholastic Aptitude Test (SAT®) and the Graduate Record Examinations® (GRE®). In a 1937 speech at the annual meeting of the Educational Records Bureau, James Bryant Conant advocated the formation of a “nationwide cooperative testing service,” because he believed that standardised testing would be advanced by a substantial research program concentrated in one organisation. The goal was to form a “general examinations board,” because they believed testing could be made more efficient by eliminating competition and duplication, and because he thought that more resources would be available for research and development if a unified organisation was formed: Educational Testing Service (ETS).

Nowadays, we can wonder how can such an organisation succeed as a nonprofit educational measurement organisation in the 21st century? To answer this question requires a close look at the idea of mission. According to ETS researcher Randy Elliot Bennett, an organisational mission is, essentially, nothing more than a statement of purpose. Therefore, a nonprofit organization’s “mission” must be aligned with its exempt purpose; otherwise, the organisation could not remain exempt. ETS’s mission is to “… to help advance quality and equity in education by providing fair and valid assessment, research and related services,” which is quite close to its chartered purpose. Such an organisation may not, as primary operating strategy use unrelated business to fund its mission. So, what additional strategies are available to fund the mission for such an organisation?

One strategy is through for-profit subsidiaries, which protect the exempt status of the parent from unrelated income and allow outside investment. This is an approach that ETS used in the 1990s and more recently, with the creation of ETS Global BV.

To conclude, ETS is a nonprofit educational measurement organisation with public service principles deeply rooted in its progenitors and according to the Internal Revenue Service. Both its progenitors and the framers of the tax code were interested in the same thing: providing a social benefit. It is reasonable to argue that, in the 21st century, renewed meaning can be brought to ETS’s mission by attacking big challenges in education and measurement and using assessment to increase diversity. But through the history, we can see that the purpose of a nonprofit organisation like ETS is not about making money. Its purpose is also not about making money to support its mission. Its purpose is about doing its mission and making enough money in the process to continue doing it in better and bigger ways.

If ETS succeeds in being responsive without being responsible, or in being responsible without being responsive, it will have failed its main mission. ETS, and kindred organisations must do both. Doing both is what it means to be a nonprofit educational measurement organisation in the 21st century.