Non-Governmental Organization (NGO): Definition, Example, and How It Works

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What Is a Non-Governmental Organization (NGO)?

A non-governmental organization (NGO) is a group that functions independently of any government with the objective of improving social conditions. NGOs are typically non-profit institutions. They are sometimes called civil society organizations and 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.
  

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. 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 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, and 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 the 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.

Variations of NGOs

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

Many 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. They are generally government-backed NGOs that support repressive regimes 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.
• 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 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.

The Bottom Line

Non-governmental organizations (NGOs) seek to improve social and political problems locally, nationally, or internationally. They work outside the frame of the government, are usually not-for-profit, and can obtain tax-exempt status if they meet certain criteria.

1. World Bank, Operations Policy Department. "Working With NGOs," Page 14.
2. U.S. Department of State. "Non-Governmental Organizations (NGOs) in the United States."
3. Internal Revenue Service. "Exempt Organization Types."
4. Council of Europe. "The Conference of International Non-governmental Organisations of the Council of Europe."

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