_____ are an example of government or nonprofit organizations.

In order to solve the federal government’s budget problems, some policymakers have called for cuts in spending on social services, assuming the nonprofit sector can fill the gaps.

What many fail to realize is that the nonprofit sector relies on government support to provide these crucial social services. In fact, in 2010, nearly one out of every three dollars given to public charities came from government sources. So, in addition to rendering them unable to fill any gaps, cuts in funding would force nonprofits to cut nearly one-third of their own services.

While nonprofits are dependent upon the public sector for funding, the government is dependent on the nonprofit sector to provide services to its constituents.

To examine the relationship between government and nonprofit organizations, the Urban Institute conducted a national survey of human service nonprofits in 2009.  The survey found that nonprofits that reported problems (like late payments, contracts not covering the full cost of service, complex reporting requirements, etc.) with their government contracts and grants were more likely than nonprofits without problems to freeze or reduce employee salaries, lay off employees, and draw down on their reserves.

Overall, the survey revealed large-scale systematic problems in government-nonprofit contracting and grants processes that adversely affected the ability of many nonprofits to serve their clients. That said, government funding is absolutely necessary to help nonprofits achieve their missions. When nonprofits have difficulty obtaining government funding, the organizations and those they serve suffer. Cuts in federal funding would make this a more common occurrence.

While the survey provided insight into the relationship between the government and nonprofit organizations, many questions were raised about the government’s perspective on nonprofit contracting and grants processes, as well as a need to greater understand trends and improvements in the processes that are underway.

The Center on Nonprofits and Philanthropy at the Urban Institute is in the process of conducting a national survey of all nonprofit organizations (except hospitals and higher education institutions) to compare to the 2009 results. We are also conducting a case study in Maryland to highlight promising practices implemented at the state and local level to improve the government-nonprofit relationship. This follow-up work also seeks to capture the government perspective on its relationship with nonprofits through interviews and a survey of government officials.

As the public and nonprofit sectors rely on each other to provide services, understanding and improving their relationship is a high priority.

A non-governmental organization (NGO) is a group that functions independently of any government. It is usually non-profit. NGOs, sometimes called civil society organizations, are established on community, national, and international levels to serve a social or political goal such as a humanitarian cause or the protection of the environment.

For example, NGOs might focus on activities in areas involving health or health emergencies, education, infrastructure, advocacy of minority rights, support of the poor, and the reduction of crime.

Key Takeaways

• NGOs, or non-governmental organizations, play a major role in international development, aid, and philanthropy.
• NGOs are often non-profit and may run budgets of millions or up to billions of dollars each year.
• NGOs rely on a variety of funding sources, from private donations and membership dues to government grants.
• Advocacy NGOs work to influence public policy.
• Some well-known NGOs include the American Red Cross, the Salvation Army, and Amnesty International.
  

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Watch Now: What Is an NGO?

Understanding NGOs (Non-Governmental Organizations)

The term NGO is generally accepted to refer to usually non-profit, private organizations that operate outside of government control. Some NGOs rely primarily on volunteers while others support a paid staff. The World Bank identifies two broad groups of NGOs:

• Operational NGOs, which focus on the design and implementation of development projects
• Advocacy NGOs, which defend or promote a specific cause and seek to influence public policy

Some NGOs may fall under both categories simultaneously. Examples of NGOs include those that support human rights, advocate for improved health, or encourage political participation.

In the U.S., the formation of NGOs is fully supported by the government and government regulations. They're considered an important component of a civil society. There are about 1.5 million NGOs operating in the U.S.

How Do NGOs Work?

A non-governmental organization, or NGO, is an organization established by a group of individuals that wishes to pursue goals and aspirations that relate to the public, social, or political good of a nation or the world.

According to the U.S. State Department, U.S. regulations were created to assist in the formation of NGOs. These regulations have no bias as to the value of any NGO or the kind of work that it does.

NGOs focus on a wide range of issues and areas. These might include women's rights, the health of the environment and planet, healthcare, political advocacy, labor unions, religious faith, care of aging adults, and youth empowerment.

While the government is not involved in the activities of NGOs, U.S. law normally regulates them via their filing of information returns that show an NGO's funding, management, and activities.

Forming an NGO

Any group of people may form an NGO without government approval or involvement. In addition, one need not be a U.S. citizen to form an NGO in the U.S. However, should an NGO wish to obtain legal benefits such as exemption from state and federal taxes, it should incorporate and register as an NGO under the relevant laws of the state in which it's located.

An NGO doesn't have to incorporate. For instance, to form a charitable NGO, all that's required (as is for any charitable trust) is a legal contract and deed that conveys property.

While no federal government involvement comes into play, states in the U.S. may require NGOs with religious, educational, or charitable missions that may ask for donations to register with a state charity.

Tax-Exempt Status

To obtain tax-exempt status, an NGO must apply to the U.S. Internal Revenue Service (IRS). Many types of NGOs are eligible.

Non-profit NGOs organized for educational, religious, literary purposes, or to support certain sports and scientific testing for public safety are welcome to apply for exemption from federal income tax on all their funding. For state tax exemption, NGOs should apply to a state's tax authority.

NGOs that engage in political activities may receive some tax benefits for income they receive from the public, membership dues, and fundraising events.

Contributions to NGOs may be tax-deductible for donors.

Some NGOs may be subject to government or IRS restrictions and rules that relate to such things as excessive compensation, lobbying beyond a limited degree, certain commercial activities, and governance.

How Are NGOs Funded?

NGOs rely on a variety of sources for funding, including:

• Membership dues
• Private donations from individuals, private sector businesses, and philanthropic organizations
• The sale of goods and services
• Grants
• Funding from foreign governments and organizations

Despite their independence from governments, some NGOs rely heavily on government funding. Large NGOs may have budgets in the millions or billions of dollars.

Federal and state governments may not make decisions about whether to grant or revoke an NGO's tax-exempt status based on their opinions of the NGO's value or mission.

Types of NGOs

The American Red Cross, Salvation Army, and Amnesty International are considered examples of NGOs.

A number of variations of the NGO acronym exist:

• INGO: an international NGO. For example, the Conference of INGOs of the Council of Europe is comprised of more than 300 participating INGOs.
• GONGO: this means government-organized NGO, often derogatory. Foreign Policy describes GONGOs as a government-backed NGOs set up to advocate on the behalf of a repressive regime in the international arena.
• QUANGO: chiefly a British term, often derogatory. A quango is a quasi-autonomous non-governmental organization that relies on public funding. Its senior officials are appointed by the government. A Financial Times opinion piece by British economist John Kay asserted that quangos are seen as useless and are often staffed by quangocrats.
• ENGO: an environmental NGO, for example, Greenpeace or the World Wildlife Fund. Both groups operate internationally in addition to advocating for the environment. They are often simply referred to as NGOs.

What Is an Example of a Non-Governmental Organization?

A non-governmental organization, or NGO, typically is established to work toward public or social welfare goals. For instance, an NGO could focus on human rights, voters' rights, healthcare, helping the poor, and preventing cruelty to animals. NGOs can be funded by donations and grants. One example of an NGO is Greenpeace International. It was founded in 1971 to protect the environment and the Earth.

How Does an NGO Work?

NGOs can be formed by any group of people that wants to carry out missions in the public interest. They can have staff and budgets. NGOs can operate internationally. The government has no influence over them and no say in their activities or tax-exempt status. They can be non-profit, and usually are. They rely on donations, grants, and membership dues for funding.

What Is the Difference Between an NGO and an NPO?

NGO stands for non-governmental organization. NPO stands for non-profit organization. A non-profit organization returns any profits it makes to the organization to pay expenses and salaries and further its goals. It doesn't pay out profits to shareholders or owners. It isn't a business that exists to make a profit. Some NGOs may be NPOs. Not all NPOs are NGOs.

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