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A non-governmental organization (NGO) is a type of nonprofit that typically pursues its charitable mission internationally. Although the laws that enable the creation of NGOs are different in every country, the ways these types of organizations are supported is largely standardized. NGO support primarily comes from individual donations and corporate and foundation grants. Additional support sometimes comes from government grants and contracts, membership fees and corporate sponsorship. Certain organizations rely heavily on money raised from special events or through social entrepreneurship, while some organizations qualify for program-related investments from private entities.
Nonprofits are formed under the laws of their home countries, but like any corporation, they can obtain permission 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.
Permissible types of NGO support are usually defined by law. If a nonprofit accepts certain types of support, it can lose its status as a nonprofit. Although nonprofit law differs by jurisdiction, the support provisions are mostly uniform. This is a necessary standardization so donors can be confident that their gifts are allowed under the law, even if the NGO is organized under the laws of a different country.
Individual donations and grants from foundations and corporations typically makes 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 how funds are used. Grants are ordinarily tied to program objectives, so 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 does not mean it cannot receive money from government agencies to run programs. Some nonprofits are membership organizations and receive support from the payment of dues. In some instances, nonprofits have special advertising relationships with corporations and rely on corporate sponsorship to cover a large part of the budget.
Special events and social entrepreneurship are two NGO support categories that are particularly important to certain organization. Some nonprofits have a yearly special event that raises most of their operating budget. Other organizations sell a special product, the proceeds from which support operations. In both instances, the nonprofit tries to better control the influx of cash into the organization, rather than waiting on a donation to arrive in the mail.
Finally, certain types of NGOs can receive investments from private entities that they must eventually pay back. These program-related investments provide upfront support so a nonprofit can launch a resource-intensive project. Typically, these sorts of investments are important to community economic development organizations.
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