Non-Governmental Organization (NGO): Definition and How It Works
What Is a Non-Governmental Organization (NGO)?
A non-governmental organization (NGO) is a mission-driven organization that operates independently of the government. Also known as a civil society organization, an NGO may be established at the community, national, or international level to serve a cause, such as protecting the environment.
Most are non-profits, and some receive government funding.
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 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.
Types of Non-Governmental Organizations (NGOs)
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.
There are about 1.5 million NGOs operating in the U.S.
How NGOs Work
According to the U.S. State Department, U.S. regulations were created to assist in the formation of NGOs.
NGOs focus on a wide range of issues and areas. These might include women's rights, the environment, 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 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 are welcome to apply for exemption from federal income tax. 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 the income they receive from the public, membership dues, and fundraising events.
Contributions to NGOs may be tax-deductible for donors.
NGOs may be subject to certain IRS restrictions and rules.
How Are NGOs Funded?
NGOs rely on a variety of sources for funding, including:
- Membership dues
- Private donations from individuals, 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 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.
Variations of NGOs
There are many variations of the NGO acronym.
- INGO: An INGO is an international NGO. For example, the Conference of INGOs of the Council of Europe is comprised of more than 300 participating INGOs.
- QUANGO: A QUANGO is a quasi-autonomous non-governmental organization that relies on public funding. Its senior officials are appointed by the government.
- ENGO: An ENGO is an environmental NGO. Examples include Greenpeace and the World Wildlife Fund.
What Is an Example of a Non-Governmental Organization?
The American Red Cross is a well-known NGO, as is Greenpeace.
How Does an NGO Work?
An NGO can be formed by any group of people that wants to carry out a mission in the public interest. They can have staff or volunteers, and operate with a range of budgets. They work independently of the government, but may receive government funding. They can be non-profit, and usually are.
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.
The Bottom Line
Non-governmental organizations (NGOs) work towards a mission on local, national, and international levels. They work outside the frame of the government, are usually not-for-profit, and can obtain tax-exempt status if they meet certain criteria.