How Do NGOs Get Funding?

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 June 2024, there are over 1.8 million non-profit organizations in United States.

Types of NGOs

The World Bank recognized two types of NGOs: 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.

Despite their independence from the government, a number of NGOs rely heavily on government funding to 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.

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.

Example of NGO Grant Funding

The Religious and Nonprofit Security grant program, established in 2023, provides funding for security equipment, training, and other critical safety needs for faith organizations and nonprofits targeted due to their mission, ideology, or beliefs. In its inaugural year, the program awarded nearly $500,000 to 20 faith-based organizations and nonprofits in Washington State, with individual grants of up to $25,000. Despite receiving 116 applications requesting over $2.4 million, only a fraction could be funded.

In 2024, the Washington State Department of Commerce is expanding this initiative, with the state legislature increasing the funding to $1.5 million. This updated program aims to support religious institutions, nonprofit by-and-for organizations, and nonprofit community centers. Applicants had to demonstrate their vulnerability to physical attacks, threats, or damages due to their mission or beliefs. Grants can be used for physical security enhancements or preparedness planning, training, or exercises. The application deadline for the 2024 grants was July 2, 2024.

Example of NGO Fundraiser

The 29th Annual Red Cross Gala, themed "Building Bridges of Hope," successfully raised $950,000 to support the lifesaving programs and services of the American Red Cross of the Bay Area. Held on March 21, 2024, at Pier 27 in San Francisco, the event attracted over 300 notable attendees

The event featured a cocktail reception, live entertainment, and a live auction. Co-chaired by Elizabeth J. Folger and Patrick “Pat” Hayes, the gala honored the Regional Blood Services Volunteer Committee and Delta Dental for their outstanding humanitarian contributions, emphasizing the critical role of blood donation and distribution in saving lives. During the gala, the Red Cross recognized Michael Gregory, Kathryn W. Holmes, Nichole S. Jordan, and Jasper Smith as the 2023 Red Cross Humanitarians of the Year for their dedication to the Regional Blood Services Volunteer Committee. The event was made possible by numerous sponsors (which acted as another funding source for the NGO).

The Bottom Line

As nonprofits, NGOs rely on a variety of sources for funding and can have large budgets totaling 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.