NGOs are non-profit organizations that rely on public support, including individual donations, grants, government contracts, membership fees, and corporate sponsorships. They pursue their charitable mission internationally and are often called international nonprofits. Nonprofits cannot sell products for profit and must adhere to laws governing their permitted types of support. Some NGOs rely on special events or social entrepreneurship, while others receive program-related investments from private individuals.
A non-governmental organization (NGO) is a type of non-profit organization that generally pursues its charitable mission internationally. While the laws permitting the creation of NGOs are different in each country, the ways in which these types of organizations are supported are largely standardised. NGO support comes primarily from individual donations and corporate and foundation grants. Additional support sometimes comes from government grants and contracts, membership fees, and corporate sponsorships. Some organizations rely heavily on money raised from special events or through social entrepreneurship, while some organizations qualify for program-related investments from private individuals.
Nonprofits are formed under the laws of their home countries, but like any business, they can be licensed to operate anywhere in the world. International nonprofits are often called NGOs to reflect their independence from their native governments. The distinguishing feature of a nonprofit is that it does not sell a product to make a profit. Instead, it pursues a mission and relies primarily on public support to operate. Public support takes the form of gifts and grants from a wide variety of sources.
The permitted types of NGO support are generally defined by law. If a nonprofit accepts certain types of support, it may lose its nonprofit status. Although nonprofit law differs by jurisdiction, the underpinning provisions are mostly uniform. This is a necessary standardization so that donors can be confident that their gifts are permitted by law, even if the NGO is organized under the laws of another country.
Individual donations and grants from foundations and corporations typically make up the bulk of NGO support. Receiving donations directly from individuals is the most desirable form of support because it often gives the organization the most flexibility regarding the use of funds. Grants are normally tied to program goals, so they can be much more limited in use.
Government grants and contracts are another category of NGO support. Just because an NGO is independent of the government doesn’t mean it can’t receive money from government agencies to run programs. Some nonprofits are membership organizations and receive support from dues payments. In some cases, nonprofits have special advertising relationships with corporations and rely on corporate sponsorship to cover a large portion of their budget.
Special events and social entrepreneurship are two categories of NGO support that are particularly important for certain organisations. Some nonprofits have an annual special event that raises the bulk of their operating budget. Other organizations sell a specialty product, the proceeds of which come from support operations. In both cases, the nonprofit seeks to better control the flow of money into the organization, rather than waiting for a donation to arrive in the mail.
Finally, some types of NGOs may receive investments from private entities which they may eventually have to repay. These program investments provide initial support so that a nonprofit can start a resource-intensive project. Typically, this type of investment is important to community economic development organizations.
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