what are they, what kinds exist, and what is their significance?
Definition of non-profit organizations and their types
We should start by pointing out the little-known fact that in the legislation of many states there is no definite concept of what a “non-governmental non-profit organization” is. This is especially characteristic of Great Britain. Instead of such a term you can mostly hear “non-profit association”, “foundation”, “voluntary organization”, “charitable organization”, they are defined by separate laws, which in turn can be quite specific.
It’s worth noting that nonprofit organizations don’t have much to do with the government, as it is inherently self-contained. There are a number of terms that stand for the types of such organizations and their particularities, but they also all have some things in common. The types of nonprofit organizations themselves are as follows:
- Not-for-profit organization (NFPO) – this term is more prevalent in the United States and in the international community, which in turn refers to organizations of this type
- Non-governmental organization (NGO) – as you can see from the name, these organizations are not associated with the government, the term is mainly used to summarize the documents of such companies
- Charity – the term you will most often hear in the UK, where it has a fairly broad meaning, which covers the whole range of socially useful organizations, which are associated with such cause as charity
- Private voluntary organization (PVO) – private voluntary organization
- Civil social organization (CSO) – social organization
What are the similarities between all of these types?
As mentioned above, although all such enterprises have their own rather broad terminology, they have certain common features, such as:
- have an institutionalized structure
- are separate from the government
- do not distribute profits to their founders or managers
- are self-governing
- voluntary (in the sense that the law does not require compulsory membership or participation in them, because their activities depend to some extent on people’s voluntary contributions or volunteer work)
It is these features that are considered basic characteristics of the nonprofit sector, which in turn are also their common features.
Regulation of such organizations at the legislative level
Having analyzed the legislation of more than a hundred states, the International Center of Not-for-Profit Law and the World Bank made an analysis, which in turn helped them to identify best practices in the field of non-profit organizations, and then also to make principles of regulation at the legal level of such companies. Such principles define the procedure for the creation of this type of company, its registration, as well as how to terminate and liquidate a non-profit organization mainly non-profit organizations are directly related to the solution of social, cultural, educational, scientific problems or tasks, as well as issues of human health and nature, protection of human rights, which are all aimed at the satisfaction of the benefits of society. Among the recommendations of this type, there is also a very clear provision that sounds like this, that non-profit organizations are the main participants in the formation and discussion of issues that concern public and political aspects of society, and that they have the right to speak openly on absolutely any issue that is important for the public and that can contain criticism and discussion of both existing and proposed political solutions.
How do we classify such an organization?
Classification of non-profit organizations is based on the following characteristics:
- the purpose of the organization’s activities
- degree of state presence in the non-profit organization
- participation in the production process (whether or not it performs its own production)
- relationship to the market (whether it is market or non-market)
- the nature of clientele and staff attraction (volunteers or not)
- legal status (international, national, regional)
- sources of financing;
- tax treatment
Such concept as the purpose of non-profit organization can be interpreted in different ways, as it has a dual meaning. On the one hand, it is associated with the type of activity (in terms of protection of rights, religion, science, etc.), and on the other hand, it has to do with the choice of the form of organization of a nonprofit organization. Also, the activities of such organizations can be productive or, on the contrary, non-productive. One organization may engage in trade, which refers to the market type, but another may just give people different grants, documents, etc.
Relation of nonprofit sector to the global economy
The non-profit sector contributes directly and indirectly to the global economy. Thus it is necessary to understand what it is and how it works. Direct contributions have to do with the fact that the nonprofit sector is an area that provides employment and self-employment for the majority of the population. Thus, in terms of employment in terms of its functions, the non-profit sector is very much like a small business, but it additionally provides social and psychological support for its employees and volunteers, while being more active in engaging socially vulnerable segments of the population (such as disabled children, unemployed older women, disabled people, etc.) in economic activities. Non-profit organizations both buy and produce goods and services necessary for their activities, thereby stimulating the active demand of consumers. At the same time, such organizations work in their sphere, which under the natural state of affairs on the free and competitive market would not interest the commercial sector, because they would give little profit.
Indirect contributions are due to the fact that non-profit organizations introduce elements of competition into the social sphere. By creating competition for state and municipal structures, non-profit organizations increase the efficiency of systems that provide social services in general. Improved efficiency only means that much fewer resources will be taken out of the economy to perform a certain amount of social functions than before, which in turn may serve to reduce the tax burden, meaning that more resources can be invested in growth rather than in paying certain taxes. The activities of nonprofit organizations markedly improve the educational and health outcomes of a nation, which, according to current research, increases economic efficiency several times over and provides a higher rate of economic growth. Nonprofit organizations contribute enormously to social and political stability, which are prerequisites for economic development.
As for Great Britain, nonprofit charities are incredibly widespread here, mostly tied to the religious sector. This works in such a way that it is accepted here to think that religion, as well as its dissemination, is of great benefit to society. Therefore, non-profit organizations can be responsible for building temples or giving money to religious structures. It is important to note that in Britain, more than anywhere else, all religions are respected. But it is also worth noting that under British law, a cause is not considered charitable if it primarily pursues the interests of a particular person or persons, or if the people to whom the charity is given are connected by personal or contractual relationships. Thus, family ties with the founder of the organization, their employment relationship will not constitute charity, only except in cases of assistance in financial difficulties, or the relationship of members of a particular professional organization.