Definition
NGO stands for Non-Governmental Organization. It refers to a nonprofit entity that operates independently of any government, typically with the aim to address a social or political issue. NGOs are funded by donations and are involved in a variety of fields such as education, health, environment, and human rights.
Key Takeaways
- The term NGO stands for Non-Governmental Organization. It is a not-for-profit organization that operates independently from any government.
- NGOs are usually funded through donations, often from private individuals, businesses, or other non-governmental entities. This funding is used for a wide variety of projects like health, education or environmental programs, etc.
- While NGOs are not designed to be financial benefit entities, they do have significant economic impact. This includes generating job opportunities, mobilizing resources, and contributing to national income through their diverse programs and initiatives.
Importance
NGO, which stands for Non-Governmental Organization, is a crucial finance term as it represents non-profit entities that operate independently of any government.
They are primarily funded by donations and function to provide social services, advocate for various causes, or promote the interests of underrepresented or marginalized groups.
In a financial context, understanding the role and funding mechanisms of NGOs is key as they often contribute significantly to economic activity and social welfare.
They also present a different set of financial management and accounting practices compared to for-profit organizations.
Therefore, NGOs are an essential aspect of the finance sector, particularly in the context of social entrepreneurship, impact investing, and philanthropy.
Explanation
An NGO, or non-governmental organization, primarily serves a societal purpose and operates independently of any government. Often working towards a specific cause or a set of causes, NGOs conduct a wide range of activities. Their primary purpose is to promote social or political change on a broad scale.
They address issues concerning human rights, environmental, educational, health or developmental causes. A key part of the work done by NGOs is advocating for and contributing to the wellbeing of communities, individuals, and the environment, striving to make a positive difference on local, national, or international levels. An NGO uses different approaches to achieve its objectives.
Fundraising and securing donations form a significant part of an NGO’s functioning since they rely heavily on public funding and private donations, rather than government support. They aim to use these funds in the most efficient and effective way to serve their cause. Furthermore, NGOs serve as a tool for citizens to voice their concerns and influence policy-making at all levels.
They also ideally work towards creating awareness about certain issues and fostering participation from the public to address these concerns. In essence, the use of an NGO is pivotal in fostering social reform and in forwarding humanitarian efforts.
Examples of NGO
Sure, the term “NGO” stands for Non-Governmental Organization, which is a non-profit unit that operates independently of any government. The principal goal of an NGO is to promote various social and political issues. Here are examples of three internationally known NGOs:
Oxfam – Oxfam is an international confederation of 20 NGOs working with partners in over 90 countries to end the injustices that cause poverty. They focus on impact areas such as food and climate justice, gender justice, sustainable finance, migration, and many other issues.
Greenpeace – Greenpeace is a non-governmental environmental organization with offices in over 39 countries and an international coordination body in Amsterdam, the Netherlands. They focus on issues such as climate change, deforestation, overfishing, and pollution.
Médecins Sans Frontières (Doctors Without Borders) – This is an international humanitarian medical NGO that provides emergency medical assistance to populations in danger in more than 70 countries. They offer help to people based on need and irrespective of race, religion, gender, or political affiliations.
FAQs for NGO Finance
What is NGO Finance?
NGO Finance refers to the management and utilization of funds within Non-Governmental Organizations. It includes resource mobilization, budget planning, financial reporting and auditing. It is essential to ensure transparency, sustainability and effectiveness of these organizations.
Why is financial management important in a NGO?
Financial management is vital in a NGO for accountability to donors, government, beneficiaries and other stakeholders. It’s also essential for financial sustainability, as it aids in planning and steering the organization’s financial direction whilst preventing potential issues like fraud.
What sources of funding are accessible to NGOs?
NGOs have a diverse range of funding sources, including grants from international organizations, local and central government funding, corporate donations, individual sponsorships, fundraising activities, and income-generation projects. Some NGOs also receive support in the form of voluntary labor.
What is included in a NGO’s financial report?
A NGO’s financial report typically includes a balance sheet, income statement, statement of cash flows, statement of changes in net assets/fund balances and notes to the financial statements. These records provide an overview of the NGO’s financial health, income sources, expenditure, and changes in fiscal position over a certain period.
What is a financial audit in the context of an NGO?
A financial audit in an NGO is a systematic examination of the organization’s financial records, transactions, and reports. Its purpose is verifying that financial management practices comply with the law, ensuring transparency and accountability, and validating that funds have been used responsibly and for its intended purpose.
Related Entrepreneurship Terms
- Non-Profit Organization
- Charitable Contributions
- Donor Funding
- Civil Society
- Program Evaluation
Sources for More Information
- NGO.org: This is an international NGO directory which could serve as a comprehensive information source about NGOs worldwide.
- INTRAC: The International NGO Training and Research Centre (INTRAC) provides resources and training for NGOs.
- Devex: This is a media platform for the global development community, offering news, business intelligence, funding and career opportunities in international development.
- Oxfam International: Oxfam is a global movement of NGOs working with partners worldwide to end the injustices that cause poverty.
