How Do NGOs Get Funding? (2024)

What Is an NGO?

A nongovernmental organization (NGO) is a nonprofit, citizen-based group that functions independently of government but may be involved in international philanthropic, developmental, or social missions. NGOs are often organized on local, national, or international levels to serve specific social or political purposes. As of 2021, there are approximately 1.5 million NGOs operating in the United States.

Key Takeaways

  • Nongovernmental organizations (NGOs) play a major role in international development, aid, and philanthropy.
  • NGOs are nonprofit by definition but may run budgets of millions or up to billions of dollars each year.
  • NGOs rely on a variety of funding sources, from private donations to membership dues to governmental contributions.

Types of NGOs

Two broad groups of NGOs are identified by The World Bank: operational NGOs, which focus on development projects, and advocacy NGOs, which are organized to promote particular causes. Certain NGOs may fall under both categories simultaneously. Large NGOs may have budgets in the millions or even billions of dollars.

The World Bank lists a total of 47 NGO variations, including:

  • BINGO — Big International NGO (e.g., the Red Cross)
  • ENGO — Environmental NGO (e.g., Greenpeace and the World Wildlife Fund)
  • GONGO —Government-Organized NGO (e.g., the International Union for Conservation of Nature)
  • INGO — International NGO (e.g., Oxfam)
  • QUANGO —Quasi-NGO (e.g., the International Organization for Standardization (ISO))

How Are NGOs Funded?

As nonprofit organizations, NGOs rely on a variety of sources for funding projects, operations, salaries, and other overhead costs. Because the annual budget of an NGO can be in the hundreds of millions (or even billions) of dollars, fundraising efforts are important for the NGO’s existence and success. Funding sources include membership dues; the sale of goods and services; private sector, for-profit companies; philanthropic foundations; grants from local, state, and federal agencies, as well as foreign governments; and private donations.

Individual private donors can comprise a significant portion of NGO funding. Some of these donations come from wealthy individuals,such as Ted Turner’s $1 billion donation to the United Nations, which led to the creation of the UN Foundation and the Better World Fund.

Another example, as reported by CNBC, would be Warren Buffett’s 2006 pledge to give 10 million Berkshire Hathaway Class B shares to the Bill & Melinda Gates Foundation (valued at more than $31 billion in June 2006). As of the end of 2022, Buffett had donated a total of $36 billion to the Gates Foundation. However, NGOs also can rely on a large number of small donationsrather than a small number of large donations.

Despite their independence from government, a number of NGOs rely heavily on government fundingto function. Some government NGO funding may be viewed as controversial, because the funding may dampen an NGO’s ability to advocate politically or attempt to achieve radical goals.

$36 Billion

The amount donated by Warren Buffett to the Bill & Melinda Gates Foundation as of the end of 2022.

Are Private Donations to NGOs Tax Deductible?

Private donations to NGOs are tax deductible only when the organization has been granted 501(c)(3) status. The Internal Revenue Service (IRS) lists the following qualifying purposes for an organization: “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.”

It is possible for an NGO to have tax-exempt status but not be designated as 501(c)(3). According to the IRS, such groups include “social welfare organizations, civic leagues, social clubs, labor organizations and business leagues.”

Political organizations are usually not tax exempt, as 501(c)(3) groups “are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.” However, groups devoted to certain political activities, if conducted in a nonpartisan manner, may qualify, such as voter education efforts, voter registration drives, and get-out-the-vote drives.

What is a nongovernmental organization (NGO)?

Nongovernmental organizations (NGOs) are nonprofit groups organized independently of the government by private citizens. They can pursue a wide variety of goals for social, developmental, or political purposes and can operate on a local, national, or even international plane.

How do NGOs raise money?

NGOs can accept donations from private individuals, for-profit companies, charitable foundations, and governments, whether local, state, federal, or even foreign. As nonprofit entities, they also can charge membership dues and sell goods and services.

Are donations to NGOs tax deductible?

Private donations to any nonprofit are only tax deductible if the organization has qualified for 501(c)(3) status from the Internal Revenue Service (IRS). Not all NGOs have that status, so donations should not be considered automatically deductible. Make sure you check before taking them off your taxes.

The Bottom Line

As nonprofits, NGOs rely on a variety of sources for funding and can have large budgets totaling in the billions of dollars. They serve a wide variety of purposes, but two main types are operational NGOs, which focus on development projects, and advocacy NGOs, which promote individual causes. Not all NGOs qualify for 501(c)(3) status, so even if they are tax exempt, your donation to them might not be allowed as a tax deduction. Though they are organized independently of government, they may accept government funding, which in some cases could compromise the integrity of their mission.

How Do NGOs Get Funding? (2024)


How Do NGOs Get Funding? ›

NGOs rely on a variety of funding sources, from private donations to membership dues to governmental contributions.

How do NGOs get their funding? ›

Many NGOs receive funding from local, state, and federal government entities through grants. A grant is a financial award given to an organization with a specific purpose. Grants help provide funding for medical research, economic development, educational advances, and various projects that provide public services.

How are nonprofits funded? ›

Government funding provides a significant portion of nonprofit grant funding. Federal, state, and local government entities disburse grants for various nonprofit programs and initiatives. Government grants can be a stable funding source, but they require strict reporting and compliance with specific guidelines.

Do NGOs have to disclose funding? ›

Earning trust through financial transparency and accountability goes beyond what the law requires, but let's start there: nonprofits are required to disclose certain financial information to the public upon request, and board members must have access to financial information in order to fulfill their fiduciary duty to ...

How can we make NGO more effective? ›

As a part of strategy to expand and improve NGO organisation, the following need to be undertaken:
  1. I. Review Your Current Practice. ...
  2. II. Update the Budget Template. ...
  3. III. Develop a Sustainability Plan. ...
  4. IV. Emphasise Continuous Fundraising. ...
  5. VI. Foster NGO Partnerships. ...
  6. VII. Utilise Donor Networks. ...
  7. X. Communicate Effectively.
Sep 27, 2023

What are the three common sources for grant funding? ›

There are three main sources for grant funding:
  • The government - often federal, sometimes state, and occasionally local.
  • Private businesses and corporations.
  • Foundations, which distribute many millions of dollars per year to community groups and organizations similar to yours.

Do NGOs raise money? ›

Fundraising is the lifeblood of non-governmental organizations (NGOs). It is the process of gathering resources and assets from various sources to support the organization's mission and specific projects. Successful fundraising is essential for an NGO to achieve its goals and fulfill its mission.

How do nonprofit organizations raise most of their money? ›

There are five main ways charities and nonprofits raise funds and stretch their dollars: using volunteers, hosting gala fundraising events, selling products, sponsoring events, and advertising to bring in more donations.

What is the funding model? ›

A funding model is a methodical and institutionalized approach to building a reliable revenue base that will support an organization's core programs and services.

Why is funding important for nonprofits? ›

Large, one-time gifts like grants can push your nonprofit to fund a much-needed program or purchase essential supplies or equipment. This can bring your nonprofit into a new growth phase, attracting increased attention and new donors. Grants also build your nonprofit's visibility and credibility.

What is the difference between a nonprofit and an NGO? ›

Many non-profits are affiliated with churches, boys and girls clubs, and alumni associations. An NGO, on the other hand, has broader and internationally driven footprint. They are often working in isolated lands with widespread famine and disease, military bases, and large scale disaster such as hurricane relief.

How do I get donor funding? ›

Your prospective donors are asking why they should support your nonprofit. You need to clarify why you're asking for a donation, and sell the successes of your nonprofit. Developing a case for support gets donors to invest in your organization. People don't give to charity anymore; they invest in results.

What is an NGO example? ›

Non-Governmental Organizations (NGOs)

They include international charities such as OXFAM and Save the Children, research institutes, churches, community-based organizations, lobby groups and professional associations.

What is the world's most successful NGO? ›

Bangladesh Rural Advancement Committee (BRAC) is the largest and most influential NGO in the world. Established in 1972, BRAC has grown into a mega organization with 107,259 employees. Its annual income is about US$ 1.08 billion.

How do NGOs support? ›

Research and Development: These NGOS conduct research and help in enhancing knowledge on current issues. They develop innovative solutions based on the research to deal with social problems. Advocacy: Several NGOs attempt to influence policy development in favor of poor and marginalized communities.

How are NGOs ineffective? ›

2: Weaknesses of NGOs

Some NGOs may lack transparency and accountability, raising concerns about poor fund management and inefficient use of resources. 2. Addiction problem: In some cases, long-term NGO support can create dependency between communities, limit self-reliance and build local capacity.

What is the difference between a nonprofit organization and an NGO? ›

The biggest difference with an NGO is the scope of work that most non-profits assume. Many non-profits are affiliated with churches, boys and girls clubs, and alumni associations. An NGO, on the other hand, has broader and internationally driven footprint.

Does the UN fund NGOs? ›

UNDEF's priority is Civil Society Organizations and Non-Governmental Organizations and the large majority of UNDEF funds go to local civil society organizations; both in the transition and consolidation phases of democratization.

What's the difference between NGO and NPO? ›

Large foundations you have heard of are mostly NGOs are they cover a wider scope as compared to NPOs. NPOs focus more on the improvement of more minor but still very relevant issues like arts and culture. The leaders of both types of organizations are not to profit from the activities or donations received.

Is an IGO run by the government? ›

Intergovernmental Organizations

An intergovernmental organization (IGO) is a group of members (sovereign states, countries) working together on issues of mutual self-interest. Some IGOs are legal entities – i.e. they have been ratified by charter. The United Nations is a good example of a legally constituted IGO.

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