Understanding Non-Governmental Organizations and Charities

Non-Governmental Organizations (NGOs)

Non-profit social enterprises
Operate in the private sector (private voluntary associations)
Set up and run for the benefit of others in society
“Private organizations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services or undertake community development” – UN definition
The aim: to support a cause that is considered socially desirable
Some are concerned with a single issue (e.g., Save the Whales) or with a broader spectrum (e.g., Greenpeace).
Others may be apolitical, others political (e.g., Amnesty International).
The common element is that they are not run by a government

Non-profit social enterprise
Provide voluntary support for good causes (protection of children, animals, environment) – although some people will be paid for their work, as managers.
Key function: raising funds from individuals and organizations to support a cause that is beneficial to society
They need to catch the attention of donors
Some charities are single-event charities that provide (for example) emergency aid for specific natural disasters or war.
Other charities focus on a single issue: e.g., Save the Children.
As with regular NGOs, charities may be apolitical. Others can be partisan or have particular preferences.
The idea is that it is not run by any government, and it operates in the private sector of the economy.

Profits are not generated: they generate surpluses used to advance their social purposes.
Donations are important: these businesses cannot rely on government funding or other forms of income, so a large part of their income comes from donations. People who want to help and believe in their cause (from individuals or other organizations).
There is unclear ownership and control: who owns a charity? Who should decide things? The issue of compensation is especially complicated when the NPO is huge. Its management requires the same skills as a regular for-profit company. There are many questions regarding payments in these positions, which each NPO handles as it thinks best or as it can manage.

Advantages	Disadvantages
They help people or causes in need They can innovate	Lack of control, but intense lobbying can lead to socially undesirable goods
They can foster a philanthropic spirit in the community	Employees of nonprofits have a passion that sometimes ill-serves the organization or its cause
They can foster informed discussions in the community about resource allocation	Funding can be irregular

Advantages	Disadvantages
Social benefits: they help society in some way	Bureaucracy: registration, government restrictions, processes, etc.
Tax exemptions: as non-profit organizations, they are exempt from corporate taxes. They also have other benefits.	Disincentive effects: the lack of a profit motive can cause problems.
Tax incentives for donors	Charity fraud: financial activities must be recorded and reported.
Limited liability: charities can register as limited companies to protect the interests of employees and managers.	Inefficiencies: if there are any debts, as a limited liability company charity, no one gets the blame. What happens with the donors’ money and the cause then?
Public recognition and trust	Limited sources of finance