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)
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