The Profits of Nonprofits - The College Board


We've all heard of the term "nonprofit" before, and it's easy to understand the general gist behind its meaning: an organization whose goal is philanthropic rather than for making profits. But for most of us, our knowledge of nonprofits doesn't extend any further.

Before this article, I was in the same boat. What inspired me to think about this was The College Board, a nonprofit who has a near monopoly on the college preparatory testing industry. In 11th grade, I paid around $80 for my AP exams, and just a few days ago, I paid $120 to sign up for my AP exams. In just one year, the price had gone up so much, per test for tests that I didn't even want to take.

In fact, no one wants us to take them except colleges that accept AP tests. Since The College Board is one-of-a-kind, they can charge massive amounts of money for these exams and get away with it.

But what do they do with all of that money? Are they investing it all back into the company? If so, they shouldn't be charging that much because the fees of creating and printing a new test every month should not be that steep.

If not, is that ethical? I did some research as to whether or not nonprofits are allowed to pay their employees or not, and if so, how much.

The answer was that they can in fact pay their employees, and there is no hard cutoff for how much they can be paid. However, if employees are paid a significant portion of profits, they could get into trouble with the IRS and possibly have their nonprofit status revoked.

According to to the Americans for Educational Testing Reform, The College Board "[violated] its non-profit status through excessive profits and exorbitant executive compensation; nineteen of its executives make more than $300,000 per year, with CEO Gaston Caperton earning $1.3 million in 2009."

In our microeconomics class, we've been talking about how the US Government prevents monopolies, but the loopholes in the laws allow cooperating oligopolies to create a large monopoly comprised of multiple competitors.

But what about nonprofits? Can they create monopolies? The College Board is certainly a monopoly in the testing industry and no action is being taken against them. Where is the boundary line?

https://www.thebalancesmb.com/can-nonprofits-pay-staff-2501893
http://am.blogs.cnn.com/2009/12/29/educating-america-the-big-business-of-the-sat/

Comments

  1. AnonymousApril 12, 2019 at 11:25 AM

    This post was super thought provoking and made me think a lot. Good work! I definitely think that the monopoly College Board has allows them to strong arm college bound students into paying high prices. This was especially applicable because many of the services like sending scores to colleges or score rescans cost them nearly nothing, but cost us students 10-12 dollars a piece. I went ahead and looked into a court case against a monopolistic nonprofit known as Phoebe Putney Health System. The main argument from the standpoint of the nonprofit was that there was certain pieces of legislation that allowed them to bypass antitrust laws for the general good of the public.

    https://nonprofitquarterly.org/2012/11/29/supreme-court-hears-antitrust-case-nonprofit-monopoly/

    ReplyDelete
  2. AnonymousApril 12, 2019 at 9:56 PM

    I really enjoyed this post and it seems like the problem regarding the College Board is a serious one. Looking into the issue further, I found out that the intense monetization began in 1999 when College Board hired a new person to run the organization, Gaston Caperton. Under his guidance, College Board has become the organization it is too. Even more frightening is that College Board does not simply profit off of the tests students take, it profits off of their information. When students opt into receiving college information, the College Board sells their information to colleges and in turn earn a profit this way. The problem with College Board being a monopoly is that simply said, students have no other option and they are subject to fluctuating prices and a loss of privacy.

    Source : https://www.theodysseyonline.com/collegeboard-fraud

    ReplyDelete

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