About Non-Profit Organisations

What is the non-profit, or civil society, sector?

Variously referred to as the “non-profit,” “civil society,” “voluntary,” “third,” “social economy,” “charitable,” or “NGO” sector, this diverse set of organizations shares a set of common traits the world over. Organized privately for a public purpose, self-governing, voluntary, and non-profit distributing, the non-profit sector is a critical part of social, economic, and environmental problem-solving everywhere. Despite this, key figures about its basic size, activities, and financing have been limited.

The largest empirical study of the non-profit sector to date has been carried out by the Johns Hopkins Center for Civil Society Studies (JHU/CCSS), which through a network of research partners developed a common definition and research framework for analysing the scope, structure, financing, and role of the private non-profit sector in countries around the world through the Johns Hopkins Comparative Non-profit Sector Project (CNP) (Salamon 2004). Begun in 1991, this project now extends to more than 45 countries.
The CNP’s definition, a classification, and research methodology adopted by the CNP has since been adopted by the United Nations Statistics Division as the official approach for documenting the size and contribution of the sector to the economies of countries (United Nations 2003).

This definition holds that non-profit organizations, the world over, exhibit all following five features:

  • A. Organizations, i.e., they have some structure and regularity to their operations, whether or not they are formally constituted or legally registered.
  • B. Private, i.e., they are institutionally separate from the state, even though they may receive significant support from governmental sources.
  • C. Not profit-distributing, i.e., they are not primarily commercial in purpose and do not distribute any profits they may generate to their owners, members, or stockholders. Non-profit institutions can generate surpluses in the course of their operations, but any such surpluses must be reinvested in the objectives of the organizations, rather than distributed to those who hold financial stakes in the organizations.
  • D. Self-governing, i.e., they have their own mechanisms for internal governance, are able to cease operations on their own authority, and are fundamentally in control of their own missions and purposes.
  • E. Non-compulsory, i.e., membership or participation in them is contingent on an individual’s choice or consent, rather than being legally required, or otherwise compulsory.\

Non-profit organization are thus not a part of government and not private businesses, though they produce public goods like governments and private goods and services like corporations. And like the private for-profit sector, non-profit organizations are diverse – they may be large organizations employing hundreds or thousands of people with complicated financial and human resource management systems, or they may be small with a single employee, or none at all and be staffed entirely by unpaid volunteers. Unlike private business, non-profits may receive their funding from a variety of sources, including fees they charge for their services, from government at all levels, or from philanthropic donations from individuals, corporations, or foundations.

Activities of the non-profit sector and its education component

Non-profits perform a multitude of social functions including service provision, funding distribution, and the expression of social or cultural values. Non-profit organizations can be distributed into various grouping in order to better understand the various types; these groupings are either based on either legal, purpose, or activity criteria.

Legal classifications are generally not very specific and vary from country to country, making it difficult to produce specific comparative information. Purpose classifications focus on the mission of the organization, regardless of the activity it carries out. For example, advocacy groups with an environmental focus would be grouped together with environmental preservation organizations and land-trusts.

The drawback of purpose classifications is that they are difficult to empirically verify and users must rely on and trust organizations to self-classify themselves. Purpose classifications have not been widely implemented.

Activity-based classifications, on the other hand, group economic units according the primary activity they carry out (recognizing that units may carry out numerous activities). The International Standard Industrial Classification of All Economic Activities (ISIC) is the international reference classification of productive activities. Adopted by the United Nations Statistics Division in 1948, most countries have developed national classification schemes based on ISIC. Reflecting economic developments over the years, ISIC has been updated 5 times since it was first introduced. Education was not introduced as a stand-alone category until 1989 with the introduction of ISIC Rev. 3


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