Notes to SEFA
Educational Testing Service (“ETS”) is a non-stock corporation exempt from federal income tax under Internal Revenue Code Section 501(c)(3). ETS has wholly owned for-profit subsidiaries which are not exempt from federal income tax. The consolidated financial statements include the accounts of ETS and its subsidiaries (the “Enterprise”). All intercompany balances and transactions have been eliminated. The audits, in accordance with Government Auditing Standards, did not include the operations of the subsidiaries of ETS because those entities did not receive federal awards subject to audit in accordance with Title 2 U.S. Code of Federal Regulations (“CFR”) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the “Uniform Guidance”), but those entities were subject to audit in accordance with auditing standards generally accepted in the United States of America. The accompanying consolidated financial statements and notes to the consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. The accompanying Schedule of Expenditures of Federal Awards (the “Schedule”) includes the federal award activity of ETS. The information in this Schedule is presented in accordance with the requirements of the Uniform Guidance. The Schedule’s expenditures are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain expenditures are not allowable or are limited for reimbursement. Further, because the Schedule presents only the federal awards of ETS, it is not intended to, and does not, present the financial position, revenues, expenses, and changes in net assets of the Enterprise. For purposes of the Schedule, federal awards include all grants, contracts, and similar agreements entered into directly between ETS and agencies or departments of the federal government and all sub awards to ETS by nonfederal organizations pursuant to federal grants, contracts, and similar agreements. The National Assessment of Educational Progress (“NAEP”) 2024–2029 contracts were converted to firm fixed price agreements covering the full contract period. Accordingly, federal expenditures incurred under time and materials contracts (through April 2025), were offset against the negotiated fixed price values in determining remaining billings for the contract year.
ETS did not elect to use the de minimis indirect cost rate allowed under the Uniform Guidance
The programs’ titles and Federal Assistance Listing Number (ALN) identifying numbers were obtained from the federal or pass-through grantor, or from https://sam.gov. When no ALN number had been assigned to a program, the two-digit federal agency identifier, a period, and the federal contract or grant number was used. If the programs in the Schedule do not have a contract or grant number, the number shown as the ALN number could be the awarding agency’s two-digit prefix (or 99, if the awarding agency is not specified within the catalog) followed by “R&D”, for the Research & Development Cluster.
The regulations and guidelines governing the preparation of Federal and pass- through entities’ financial reports vary by pass-through entity and Federal agency, and among programs administered by the same agency. Accordingly, the amounts reported in the Federal and pass-through entities’ financial reports do not necessarily agree with the amounts reported in the accompanying Schedule of Expenditures of Federal Awards, which is prepared as explained in Note 1 above.