We tend to divide the world of organisations into two types or sectors – government and business. And we tend to overlook a third, distinct sector, commonly called the non-profit sector. Non-profit organisations (or ‘non-profits’) are the product of commitments by groups of people to provide a service for themselves or others, to represent their interests or lobby on behalf of others, or to practice a religion. They are not part of government, even though they may perform a public service; neither are they established or operated to make a profit for their owners.
There are some key features to non-profit organisations. I need you to know them all.
- They are organisations. They have a set of rules or a constitution that gives it a life beyond the group that began it.
- They may be formally incorporated. A legal term meaning that the organisation has a legal identity independent of its members.
- Are private organisations, institutionally separate from the State. That is, they are not directly subject to government control or direction.
- Operate on a ‘not-for-profit’ basis (do not return profits to owners). While in some respects they are like private, for-profit companies, they differ from the latter in that they do not distribute any surplus or profit they might make to their members.
- Possess significant elements of voluntary contribution. Most non-profits rely entirely on work performed without pay by their members or supporters.
- With very few exceptions, non-profit organisations are member-owned organisations and are therefore self-governing.
- The financing of non-profits is complicated (more so than for government or for-profit organisations of similar size.