A non-profit organization (NPO), also known as a non-business entity or non-profit institution, is dedicated to furthering a particular social cause or advocating for a shared point of view. In economic terms, it is an organization that uses its surplus of the revenues to further achieve its ultimate objective, rather than distributing its income to the organization’s shareholders, leaders, or members. Non-profits are tax exempt or charitable, meaning they do not pay income tax on the money that they receive for their organization. They can operate in religious, scientific, research, or educational settings.
The key aspects of nonprofits is accountability, trustworthiness, honesty, and openness to every person who has invested time, money, and faith into the organization. Nonprofit organizations are accountable to the donors, funders, volunteers, program recipients, and the public community. Public confidence is a factor in the amount of money that a nonprofit organization is able to raise. The more nonprofits focus on their mission, the more public confidence they will have, and has a result, more money for the organization. The activities a nonprofit is partaking in can help build the public’s confidence in nonprofits, as well as how ethical the standards and practices are.
Statistics in the United States
According to the National Center for Charitable Statistics (NCCS), there are more than 1.5 million non-profit organizations registered in the United States, including public charities, private foundations, and other non-profit organizations. Contributions to different charities reached $358.38 billion in 2014, which was an increase of 7.1% from the 2013 estimates. Out of these contributions, Religious organizations received 32%, educational institutions received 15%, and human service organizations received 12%. Between September 2010 and September 2014, approximately 25.3% of Americans over the age of 16 volunteered for a non-profit
Mechanism of money raising
Non-profits are not driven by generating profit, but they must produce enough income to pursue their social duties. Non-profits are able to raise money in different ways. This includes income from donations from individual donors or foundations, sponsorships from corporations, income from government funding, income from programs, services or merchandise sales, and income from investments. Each NPO is unique in which source of income works best for them. With an increase in NPO’s within the last decade, organizations have adopted competitive advantages to create revenue for themselves to remain financially stable. Donations from private individuals or organizations can change each year and government grants have diminished. With changes in funding from year to year, many nonprofit organizations have been moving toward increasing the diversity of their funding sources. For example, many nonprofits that have relied on government grants have started fundraising efforts to appeal to individual donors.
NPO’s challenges primarily stem from lack of funding. Funding can either come from within the organization, fundraising, donations, or from the federal government. When cutbacks are made from the federal government, the organization suffers from devolution. This term describes when there is a shift of responsibility from a central government to a local, subnational authority. The shift is due to the loss of funds; therefore, resulting in changes of responsibilities in running programs. Because of this frequent challenge, management must be innovative and effective in the pursuit of success.