History of the NGO Sector

Non-governmental institutions (NGOs) as we know them today are generally thought to have come into existence around the mid-nineteenth century. It was only about a century later, however, that the importance of NGOs was officially recognized by the United Nations. At the UN Congress in San Francisco in 1968, a provision was made in Article 71 of the Charter of the United Nations framework that qualified NGOs in the field of economic and social development to receive consultative status with the Economic and Social Council.

The development of modern NGOs has largely mirrored that of general world history, particularly after the Industrial Revolution. NGOs have existed in some form or another as far back as 25,000 years ago; since 1850, more than 100,000 private, not-for-profit organizations with an international focus have been founded. Growth of NGOs only took off after the Second World War, with about 90 international NGOs founded each year, compared with about 10 each year in the 1890s. Only about 30 percent of early international NGOs have survived, although those organizations founded after the wars have had a better survival rate. Many more NGOs with a local, national or regional focus have been created, though like their international counterparts, not all have survived or have been successful.

This article will present an overview of the history of modern day NGOs, with particular emphasis on international organizations. We will look at the different causes that have been championed by NGOs as the events in world history have unfolded, from the aftermath of the Industrial Revolution to the world wars and through the aftermath of the Cold War. We will also look at the evolution of the structure and purpose of NGOs as they have matured over the years.

Before 1850

NGOs in some form or another have existed for many centuries. An early form of organization, voluntary associations, can be found as far back as 25,000 years ago. As early humans began to settle in villages during the Neolithic period, some 10,000 years ago, they began to form small, local community type of organizations primarily in agrarian societies. As time progressed, non-profit groups with paid staff emerged some 5,000 years ago in major ancient civilizations.

Another form of non-profit organization, trusts, also existed during ancient times. Small trust funds called vaqfs for charitable purposes existed in ancient Persia over a thousand years ago. Trusts also existed in other societies, though not all of them have been for “philanthropic” causes: in fifteenth century England, the Week’s Charity was created to purchase firewood for burning heretics.

Foundations, another type of NGO, existed in Europe before the Revolutionary War in France. They were eliminated after 1789, however, when King Louis XVI was overthrown and the state began to assume greater responsibility over the welfare of its peoples. Since then, foundations in Europe have been few and far between, unlike their American counterparts, which have grown in prominence in the twentieth century.

The most prevalent form of early NGOs has been voluntary associations. Many were founded by religious groups, such as the Irish Protestants in 1647 who sent food to North America to aid settlers who were victims of wars with Native Americans. In the late eighteenth century in America, many associations were formed during a period of industrialization and modernization, particularly in the Northeast. In 1840, after a long visit to America, the French philosopher Alexis de Tocqueville had observed that these associations seemed to be peculiarly an “American” type of group and activity. In Democracy in America, Tocqueville wrote:

“Americans of all ages, all stations of life, and all types of disposition are forever forming associations. There are not only commercial and industrial associations in which all take part, but others of a thousand different types – religious, moral, serious, futile, very general and very limited, immensely large and very minute… Nothing, in my view, deserves more attention than the intellectual and moral associations in America.”

Early modern NGOs: 1850-1914

There were two organizations of note that were founded before 1850. One was the Central Commission on the Navigation of the Rhine, established by the Congress of Vienna in 1815. Lyman Cromwell White regards this organization as the first modern intergovernmental organization, but participation was limited to central European states. Another organization, the Superior Council of Health, was founded in 1838 in Constantinople (now Istanbul) to deal with the spread of communicable diseases. Participation was also limited, to delegates from the Ottoman Empire and Europe.

Behind these developments were events that were setting the wheels in motion for the growth of NGOs, both international and local. International law was becoming codified, international courts of arbitration were being established and international conferences to discuss ways to prevent war were being convened. Technological developments such as the invention of the locomotive engine, steamship, telegraph and telephone gave rise to global communication and consciousness. Worldwide networks of goods, capital and labor were becoming more common and established.

Against the social and economic backdrop of the time, the international NGOs founded in the second half of the nineteenth century mostly related to telegraphy, postal services, weights and measures, slavery, sugar and agriculture. Only two health organizations and one organization each relating to agriculture and education were founded before 1900.

These early international NGOs were especially influential and important. They were pioneers who recognized a need and mobilized a plan of action. The calling of the Hague Peace Conference of 1899, which led to the establishment of the Permanent Court of Arbitration, was influenced by the work of the Inter-Parliamentary Union (IPU), an organization founded to provide a platform for the peaceful cooperation of states. Before the establishment of the IPU in 1888, treaties of arbitration between states were extremely rare. Together with the International Peace Bureau, established in 1892, the IPU stressed peaceful settlement of disputes and the codification of international laws as keys to peace.

Early international NGOs were also frequently responsible for establishing international standards that are as authoritative as government mandates. Members of the International Air Traffic Association, founded in 1919 to later become the International Air Travel Association as we know the trade body today, unanimously adopted provisions of an official convention pertaining to the carrying of passengers and goods.

On the international front, NGOs also served to foster closer ties between international peoples. The International Olympic Committee, established in 1894 in Lausanne, brought together athletes from all over the world to compete in an international sporting event. The IOC made its own rules about the event, from deciding on the location of the event, held every four years, to timing and the qualifications of its participants.

International NGOs also played a significant role international relations. White cites Guiseppe Mazzini’s “Young Italy” as a major factor in the unification of the Italian states and in the creation of modern Italy, while Simeon Baldwin argues: “The empire of Germany is more the fruit of the Zollverein [customs union] of 1833 than of any of the political considerations by which it was preceded; and the Zollverein itself might never have spread so far, had it not been for the sentiment of nationalism so passionately voiced by the gathering of the Burschenschaft [Young Students Union] at Eisenach, only ten years after the congress of Vienna.” NGOs also played a large role in the creation of nations, such as Israel.

Most of these early international NGOs shared a similar structure: they had a small membership base and had permanent central offices with a secretariat. A few organizations merely had a permanent committee. Nearly all were governed by a constitution and by-laws, with the majority of international NGOs composed of national groups whose members were private citizens.

Early international NGOs also worked closely with governments. The International Red Cross (IRC), established in 1863, appealed to the Swiss government to convene an international congress to improve the treatment of the war wounded. Throughout the years, the IRC broadened its scope to include the relief of suffering in times of peace as well as in war, health education and disaster relief. During the wars, the organization also took on a political stance: “the IRCC urged the belligerent countries to adopt measures calculated to lessen the terrible consequences of the war.”

The influence of international NGOs may be best demonstrated in the resulting organizations that were formed. Its efforts at peace paved the way for the creation of the League of Nations. The international law societies and the IPU laid the foundation for the World Court. Labor-themed organizations led to the creation of the International Labor Organization. The influence of the International Free Trade Union led to the founding of the Nansen International Office for Refugees.

The World Wars: 1914-1945

Despite the efforts of NGOs at peace and the establishment of the League of Nations, nations went into war anyway – among the wars that took place were the Second World War, Japan’s seizing of Manchuria in 1931, Italy’s conquest of Ethiopia in 1935, the civil war in Spain.

Part of the failure of these international NGOs that were established before World War I in preventing wars was that they were visionary rather than practical. “They existed for the sake of being international than for the sake of getting something accomplished, debate rather than action was the rule,” says White. Many organizations held international conferences at irregular intervals and few saw the need of setting up permanent committees for continuous study.

During the war, most international NGOs ceased all activities as travel was difficult and nations battled with each other. Bodies like the IRC, however, continued operating in war zones. Some organizations were weakened as the Fascist movement gained strength – Rotary Clubs were banned in Germany and German trade unions were forced to withdraw from the International Federation of Trade Unions. But German groups continued to participate in organizations concerned with economics, science, health, sports, general technical and administrative matters.

Many private organizations kept up their activities during the wars and depression. Some organizations grew in importance, and some new international NGOs were established. The membership of the International Cooperative Alliance grew to 71 million, and the International Federation of Trade Unions to 20 million. Rotary International reportedly had $1 million in income, while the Jewish Agency for Palestine had over $4 million in income a year. Many groups redoubled their efforts, especially in matters of humanity, peace, religion, arts and sciences, and labor. On the eve of the Second World War, in the late 1930s, over 1,000 international NGOs existed.

In the two decades between the First and Second World Wars, activities relating to service or relief work gained prominence. The Save the Children Fund was founded in the United Kingdom in 1919 to coordinate efforts to help starving children around the world. The first international conference on social work was held in Paris in 1928, attended by about 2,500 delegates from 24 countries.

Emergency relief also became a focus for international NGOs during the wars. Groups aimed to provide relief to victims of wars, civil wars and totalitarianism. They also focused on national building or reconstruction efforts. The International Migration Service was established in 1925 to “render service through cooperative effort” to migrants. In 1938, the IMS set up branches in Germany, the US, and other countries.

Despite the wars that created a spirit of fierce nationalism among peoples, international NGOs flourished in their scope, and membership. Before the First World War, members of NGOs were primarily from Europe and North America, but by the Second World War, participation had extended to all parts of the world. The Soviet Union, for example, refused to participate in international organizations because they were regarded as bourgeois institutions that served the interests of capitalists. Not everyone, however, agreed: the Labor and Socialist International organization in 1923 opposed the Comintern’s stance.

The expansion in the membership of international NGOs to include participants from all over the world can be seen in the growth of women’s organizations. Before 1919, membership in the various organizations such as the International Council of Women, International Alliance of Women, and Women’s International League for Peace and Freedom was limited to Europe and North America. In the 1920s, national sections were created in Latin America, the Middle East and Asia. These sections joined the international bodies, which also created an international setting for the discussions on previously taboo topics such as birth control.

In this period, American foundations began focusing their efforts internationally. During the first wave of their existence that focused principally on the advancement for formal knowledge, the Carnegie Corporation funded a 1932 project called the “Africa Industrialization Study.” The 350-page report, Modern Industry and the African, was touted as the “first comprehensive study” of Africa under the impact of European civilization.

The Establishment of the UN: Post-1945

In the second wave of American foundations, starting around the end of the Second World War in 1945, foundations began to become mediators in the formulation of public policy.<ef>Mark Dowie, American Foundations: An Investigative History. (MIT Press, 2001), p. 2.</ref> The Ford Foundation, founded in 1936, together with the Rockefeller Foundation gave early attention to global population growth. They funded research centers and discussed implications of population research with governments all around the world.

The Second World War ended in 1945, but another war emerged in its aftermath – the Cold War between the US and the Soviet Union. The changing times were also marked by a growing economic affluence in the US and the liberation of countries from colonial rule. In the US, there was also the establishment of an open trade system, the lowering of tariffs and economic multilateralism.

The United Nations was established, bringing to the forefront the rights and interests of people, to be safeguarded through cooperative international action. By then, the role of NGOs was already important: at the time of establishment, forty two NGOs were invited to serve as advisers to the official US delegation.

It wasn’t until 1951 that UN bodies began working with international NGOs. A total of 188 organizations were recognized by a UN survey; sixty four of these international NGOs were established during and after the war. The Economic and Social Council, for example, worked closely with NGOs affiliated with religion, such as the Catholic International Union for social services, as well as the Commission of the Churches on International Affairs and the Consultative Council of Jewish Organizations. The ILO worked with NGOs such as the Inter-American Confederation of Workers, the International Conference of Free Trade Unions and the International Federation of Agricultural Producers.

The devastation brought about by the use of nuclear weapons during the Second World War led to a new push for peace. American scientists involved in the development of atomic bombs founded the Federation of Atomic Scientists in November 1945 to call for international control over nuclear and other weapons. The Inter-American Judicial Committee, founded in 1946, called for governments to consider the “rights and duties of war.”

Another organization which aimed to limited the use of nuclear energy was founded in 1953 – the Atomic Energy Commission, which three years later became the International Atomic Energy Agency. The renewed call for cooperation rather than conflict and peaceful use of nuclear energy came as the Cold War intensified. As relations between the US and Soviet Union became frosty, NGOs increased their efforts at peace and at interconnecting nations.

Women stepped up their participation in peace efforts, campaigning for the antinuclear movement as mothers and grandmothers concerned over possibly contamination from nuclear weaponry. In 1961, Women Strike for Peace called to “End the Arms Race – Not the Human Race.”

During this time, educational and cultural NGOs became particularly important in fostering contact between the US and Soviet Union. Educational exchange between students from different countries had long been important – both prewar and after World War II – to promote mutual understanding. In the 1950s, for example, the American Friends Service Commission sent voluntary forces and small groups to Russia.

NGOs were important in promoting cultural exchanges on a large scale. In 1951, the Youth for Understanding International Exchange was founded to promote peace and understanding through homestays. The Bancroft Foundation sent Japanese men to study at American colleges. These efforts were undertaken with a belief that international understanding hinged increasingly upon mutual appreciation among different cultures.

Elsewhere in the world, there were more wars – Korea, and civil wars in the Middle East. Mao Zedong’s Great Leap Forward program created a famine in China, while other countries in Asia started gaining independence from their colonizers.

For international NGOs, it was a time for humanitarian and international relief efforts. UNICEF was established in 1946, initially caring for children in war-devastated areas in countries such as Poland and Czechoslovakia, but the organization soon gave assistance to all countries “on the basis of need, without discrimination because of race, creed, nationality, status or political belief.” These efforts required large amounts of funding, with the bulk of it came from private donations from individuals and organizations in the US.

Efforts by the World Health Organization (WHO) to alleviate diseases and hunger were supplemented by Medical Assistance Programs International. Founded in 1954, the organization sent doctors and nurses from North America and Europe overseas. Specialists, for example, were sent to the Middle East and Africa in 1955 to help with an outbreak of tuberculosis. WHO also took over the work of My Brother’s Keeper, which became Brother’s Brother Foundation, to provide immunizations in developing countries.

In the area of social services, religious organizations were at the forefront of leading international rescue and relief activities. Before and during the war, these groups, particularly of Catholic and Protestant faiths in the US, sent goods to Europe and Asia, and after the Marshall Plan was formulated for Europe, focused on relief efforts in Asia and the Middle East.

The most active organization for relief in the decade after the Second World War was the Catholic Relief Service, which shipped the largest volume of goods abroad. The third largest volume was sent by the Church World Service and fourth largest by the American Jewish Joint Distribution Committee. The second largest shipper, CARE, was a non-religious organization founded in the US in 1945. Another non-religious organization with a similar focus, Oxfam, was founded in 1942 in the UK.

So important was the contribution of religious organizations to worldwide relief efforts that White calls the ecumenical movement – the movement towards Christian unity – as one of the most significant developments in international NGOs.

The term “development assistance” – economic, technological and other types of aid to developing countries – gained currency during this time, as well as support from the UN when it created a special fund for economic development in 1951. The Overseas Development Office was created to fund projects abroad by US and European organizations. By 1960, 69 percent of private funds were going to Asia, with a further 11 percent to Latin America and six percent to Africa. Governments periodically contributed funds for projects in line with state policy, but these organizations often followed their own priorities.

Human rights also gained importance. When the UN Human Rights Commission drafted an international covenant in 1948, in attendance were 18 countries, three UN affiliated agencies and 23 NGOs – six of them being women’s organizations emphasizing the equality of sexes. In the 1950s, the ILO adopted two conventions barring gender discrimination in the workplace and championing equal pay and non-discrimination. This led to the worldwide movement for women’s liberation in the 1960s.

Matters relating to the conservation of nature also began gathering momentum. In 1946, the International Whaling Commission was established. Two years later, the International Union for the Protection of Nature was founded; in 1956, it changed its name to the International Union for the Conservation of Nature.

A new interconnectedness

The world grew more interconnected than ever in the 1970s. After two decades of post-war economic growth, the onset of new problems, such as energy and currency, led to cooperation between major economic powers. Some developing countries began to industrialize, and some newly independent countries struggled to cater to basic health and social services needs of their peoples.

Against this backdrop, the number of NGOs mushroomed, from 2,795 in 1972 to 12,686 in 1984. Taking into account local branches, there were 79,786 NGOs in 1984, according to the Union of International Associations. The result of this growth in NGOs, says Iriye: “intergovernmental organizations and international non-governmental organizations have played a decisive role—in some instances even more so than the sovereign states—in the global transformation since the 1970s.” It was also during this period, in the 1970s, that the term “NGOs” gained official currency.

Iriye attributes this growth to what historian Eric Hobsbawm calls “transnational economy” in the world . Businesses began growing beyond borders, challenging the traditional hegemony of governments in defining world order. Thus the relationship between state and society changed, with governments increasingly willing to turn to civil organization to share tasks such as social services.

NGOs cropped up in countries that did not previously have any form of civil society. In Czechoslovakia, an informal group of intellectuals formed Charter 1977 to call for the respect of human rights. In Poland, Solidarity, a labor organization for dockworkers founded by future prime minister Lech Walesa, attracted a membership totaling nine million. In the Soviet Union, students, intellectuals and dissidents began to organize themselves, often clandestinely.

Outside of Europe, NGOs were formed to complement work by public authorities in areas of poverty, hunger and health; many were formed at the community level. Where governments in Asia, Africa and Latin America were could not administer social services, they turned to NGOs. Iriye attributes this to the economic problems of the 1970s that hit Third World Countries without natural resources. A corollary development – a rise in cross-national migration because of civil strife, ethnic conflict and poverty – resulted in a need for NGO intervention.

So significant were these developments in NGOs that Harold Jacobson wrote: “Humankind is crafting new political institutions that have already contributed significantly to greater global security, to better material welfare through a larger gross world product, and to higher standards of social welfare.”

Human rights became a major theme in international affairs. Cooperation grew between NGOs and governments: where governments had limited resources, NGOs stepped in to fill the gaps, such as keeping up pressure on behalf of victims of discrimination or injustice. The US, for example, established a bureau of human rights and humanitarian affairs within the State Department. Private foundations also began to fund international human rights work, especially the Ford Foundation. In the 1950s and 1960s, Ford’s budget for overseas activities exceeded those of all other private and many UN and bilateral development organizations.

The ultimate recognition of NGO effort in the area of human rights was the awarding of the Nobel Peace Prize to Amnesty International in 1977. Amnesty, which was founded in 1961, was recognized for sending observers to prisons to ensure the proper treatment of inmates.

Women’s rights grew in importance, starting in 1975 with the convening of the International Congress of Women in Mexico City, to the first international tribunal on crimes against women held in Brussels in 1976. It was the “International Decade of Women,” the years between 1975 and 1985, as designated by the UN.

Efforts to recognize the rights of the disabled grew. The first Paralympic Games was held during the Olympic Games in Rome in 1960, followed by the second in Tokyo in 1964. In 1981, the first international NGO for the disabled, Disabled Persons International, was founded.

A significant development among NGOs was the focus on primary health care. At the WHO and UNICEF Conference in Alma-Ata in 1971, there was a declaration to assert the rights and duties of people everywhere to participate in primary health care “in the spirit of self-reliance and self-determination.”

The most important result of this new spirit of self-determination was the founding of Doctors without Borders (Médicins sans Frontières) in 1971. One of its founders, Bernard Kouchner, reportedly said it was “subversive” that government authorization was needed to assist the plight of peoples in need. Through its relief work in places such as Nicaragua, Vietnam, Thailand and Africa, the line between humanitarian assistance and human rights activism became blurred.

Iriye says this spirit of self-determination was in conflict with local political ambitions and traditional prejudices. Where there was an absence of a system of governance, state authorities did not easily tolerate the activities of non-state actors. As more humanitarian agencies became involved, they posed a greater challenge the existing framework of state sovereignty. This led to the emergence of civil society as a by-product of international humanitarian work.

Like human rights, developmental assistance also grew in importance among NGOs. More international NGOs were founded as developing countries continued to face problems as competition in trade intensified and the cost of energy rose, leading to the growing rift between countries in the Northern and Southern hemispheres. In France, for example, the Catholic Church expanded the scope of existing organizations and created new ones to extend assistance to former French colonies in Africa and Latin America.

Another aspect came to the forefront as countries became more industrialized – the protection of the environment. In 1973, the UN Environmental Program defined international environment policy in connection with developmental assistance. Adoption was quick: the European Community which was also being established at the time adopted environmental action plans and began coordinating plans to develop common regulations for environmental protection.

NGOs also became more outspoken in the protection of endangered species. They became more successful than ever in persuading governments to take wildlife protection seriously. In 1972, the World Wildlife Fund and Friends of the Earth spearheaded a campaign to save the whales through newspaper advertisements and street marches in London. The efforts led to the British government imposing a ban on the import of products made from baleen whales. Another aspect of protection of the environment was being championed: historical and cultural landmarks. At a 1972 UNESCO meeting in Paris, a convention to protect the world cultural and natural heritage was signed by 75 countries.

Activities of NGOs in the 1980s and onwards were similar with what they had been doing before, but their importance in the world had increased. They also increasingly came into the spotlight and became more involved in local communities, sometimes coming into conflict with intergovernmental organizations in carrying out their missions. New causes became championed by NGOs, such as AIDS and landmines.

Conclusion

In 1989, economist Kenneth Boulding wrote: “The rise of international non-governmental organizations [is] perhaps one of the most spectacular developments of the twentieth century, although it has happened so quickly that it is seldom noticed.”

The importance of NGOs, however, should not be overstated. Smith warns that volunteer groups are not replacements for work organizations, whether governments or businesses; each have important contributions to make to human society. They are “not a cure all for any problem in any society at any period of human society… but they can be very powerful in their cumulative impact when writ large for a whole society, with impact on their members, nonmembers and sometimes surrounding biophysical environments.”

According to Boli and Thomas, there is a complex relationship between intergovernmental organizations and international NGOs. One, international NGOs can lead to the formation of intergovernmental organizations and the expansion of IGO agencies and agendas. Many IGOs were founded as international NGOs and later co-opted by states, including organizations such as the ILO, World Meteorological Organization and World Tourism Organization. Two, the creation of IGOs institutionalizes the related social sector at the global level, which legitimizes the creation of international NGOs in that sector. Three, many IGOs rely on international NGOs to provide them with information, expertise and policy alternatives.

The relationship between NGOs and governments is another matter. They have varied between “benign neglect” and “outright hostility,” say Michael Edwards and David Hulme. The very make up of these institutions creates a tension: governments are centralized and bureaucratic, while NGOs are flexible, willing to innovate and non-hierarchical. Cooperation between both parties, however, is necessary, and NGOs have generally been small players in influencing governments.

In terms of founding patterns, more international NGOs were founded before the advent of the UN. But from the 1950s onwards, both international and regional NGOs grew at about the same pace. Many NGOs were founded outside the US: most regional NGOs were founded in Europe, and by the 1970s more Asian and African international NGOs were founded than in the Americas. According to the Union of International Associations, most of the international NGOs that have been founded are industry, trade or industrial groups, followed by medicine or health care, and science, mathematics or space groups.

Over time, the structure and organization of NGOs have also changed and become more sophisticated (see appendix). They have grown in such importance that efforts by governments and multilateral agencies can be eclipsed by non-government players. The efforts by celebrities through Live Aid, a multi-venue rock concert first staged in 1985 to raise funds for famine relief in Ethiopia, now reaches about 1.5 billion viewers across the globe. With the range of causes championed covering almost every aspect imaginable, NGOs, from Amnesty International to Breast Cancer Foundation, Doctors without Borders, Greenpeace, International Red Cross, Oxfam and YMCA are now a daily part of our lives, and will continue to be so for the future.

Appendix

Strategies of Development-Oriented NGOs: Four Generations

The table's caption

Blank	FIRST	SECOND	THIRD	FOURTH
Problem Definition	Blank	Shortage	Local inertia	Institutional and policy constraints	Inadequate mobilizing vision
Time Frame	Blank	Immediate	Project Life	Ten to twenty years	Indefinite future

FIRST Relief and Welfare SECOND Community Development THIRD Sustainable Systems Development FOURTH People’s Movements Problem Definition Shortage Local inertia Institutional and policy constraints Inadequate mobilizing vision Time Frame Immediate Project life Ten to twenty years Indefinite future Scope Individual or family Neighborhood or village Region or nation National or global Chief Actors NGO NGO plus community All relevant public and private institutions Loosely defined networks of people and organizations NGO Role Doer Mobilizer Catalyst Activist/Educator Management Orientation Logistics management Project management Strategic management Coalescing and energizing self-management networks Development education Starving children Community self-help Constraining policies and institutions Spaceship earth

Bibliography

Baldwin, Simeon. 1907. “International Congresses and Conferences of the Last Century as Forces Working Toward the Solidarity of the World,” in American Journal of International Law. Vol. 1, Part II: 565-578 Boli, John and George M. Thomas, eds. 1991. Constructing World Culture: International Nongovernmental Organizations since 1875. Stanford University Press. Dowie, Mark. 2001. American Foundations: An Investigative History. MIT Press. Edwards, Michael and David Hulme, eds. 1992. Making a difference: NGOs and development in a changing world. Earthscan. Iriye, Akira. 2002. Global Community: The Role of International Organizations in the Making of the Contemporary World. University of California Press. Korten, David. 1990. Getting to the 21st Century: Voluntary Action and the Global Agenda. Kumarian Press. Smith, David Horton. 1997a. “Grassroots Associations are Important: Some Theory and a Review of the Impact Literature,” in Nonprofit and Voluntary Sector Quarterly 26: 269-306. Smith, David Horton. 1997b. “The International History of Grassroots Associations,” in International Journal of Comparative Sociology 38: 1-28. Smith, David Horton. 2002. Grassroots Associations. Sage Publications. de Tocqueville, Alexis. 1966. Democracy in America. Harper & Row. Union of International Associations. 1985. In International Organization Abbreviations and Addresses, 1984-1985. Munich. White, Lyman Cromwell. 1951. International Non-Governmental Organizations: Their Purposes, Methods, and Accomplishments. Rutgers University Press.

US Nonprofit Sector

"There is scarcely an undertaking so small that Americans do not unite for it… As soon as several of the inhabitants of the United States have conceived a sentiment or an idea that they want to produce in the world, they seek each other out; and when they have found each other, they unite. . . Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small. . . Everywhere that, at the head of a new undertaking, you see the government in France and a great lord in England, count on it that you will perceive an association in the United States." Alexis de Tocqueville, Democracy in America, 1831

In the 19th Century, French visitor and scholar Alexis de Tocqueville found a distinctive feature of American life, different from Europe at that time: citizens coming together in associations to address needs that were not being met by government and business. Tocqueville noted associations to form schools, distribute books, create prisons, and build hospitals. And this was not a new development in American life, but dated back to the colonial period. Some of these civic initiatives, such as schools, were deemed so essential that they subsequently were taken up and expanded by government to provide even wider benefit to citizens.

Non-governmental associations remain an enduring and integral condition of American life today. Currently, there are approximately 1.3 million known nonprofit charities, foundations and religious congregations in the United States. Many more associations have not been formally incorporated and recognized by the government.

Tax benefits

The U.S. government, in realizing the value of the nonprofit sector in American society, offers special tax incentives aimed at supporting charitable organizations. By providing the opportunity for nonprofits to be exempt from taxes, organizations have more funds available for their missions. And, by allowing individuals to deduct charitable contributions when calculating their individual income taxes, donations to nonprofit organizations are encouraged.

Nonprofit organizations apply for tax-exempt status under section 501(c)(3) of the U.S. Internal Revenue Code. (Religious congregations do not have to apply, but automatically receive 501(c)(3) tax-exempt status.) Tax-exempt organizations are recognized either as “public charities” (those that receive at least one-third of their annual income from the public) or “private foundations” (those that receive their primary financial support from an individual, a family, or a corporation).

Monitoring and regulating charitable organizations falls upon the Internal Revenue Service (IRS) of the federal government. However, state governments also offer special tax benefits to charitable organizations, and are involved in monitoring and regulating nonprofits.

Many Americans sustain nonprofit organizations by contributing money or goods, or through volunteering their time. Nearly half of all adults volunteer each year for nonprofit organizations, collectively providing the equivalent of 9 million full-time staff members. Furthermore, about nine out of 10 households make charitable contributions, totaling more than $207 billion a year.

The total value of private donations in response to Hurricanes Katrina and Rita alone reached $3.12 billion, and Americans donated an estimated $1.78 billion in 2005 to the relief efforts in Asia, dwarfing the contributions of other developed nations. Beyond these individual donations, Bill and Melinda Gates, through their foundation, have given more than a quarter trillion dollars a year to fight AIDS and malaria in Africa, more than have many nations. While some individual donations may be attributed to a desire for a tax deduction, a large percentage of charitable donations are not even itemized on tax forms.

Ethical concerns

While most non-governmental organizations work ethically and responsibly to achieve good for society, the sector has also been plagued with examples of abuse and mismanagement.

In 2004 and 2005, Boy Scout councils in some states were caught inflating their membership numbers with phony rosters and applications, allegedly because higher numbers means more money from donor groups and charities, and even pay raises for key staff. This has been a recurring problem in the Boy Scouts since the 1990s.

Recent newspaper articles have noted exorbitant salaries and special perks given to executive directors of other NGOs, and pointed out that money raised through some fundraising efforts mainly went to salaries and to raise more money. A number of nonprofit organization were accused of using disasters, such as like Hurricanes Katrina and Rita, and the tsunami in southeast Asia, simply to fill their coffers, including “fake” organizations that sprung up overnight to play on the sympathy of well-intentioned donors.

Well-publicized problems such as these have led to calls in 2004 and 2005 for the U.S. government to consider new legislation and have greater oversight of the NGO sector.

New legislation

The federal government moved forward on several fronts. The IRS looked into the problem, identified some key issues, and offered recommendations. In 2004, the U.S. Congress got involved, with the U.S. House Ways and Means Committee beginning an examination of the charitable community, and the staff of the U.S. Joint Committee on Taxation preparing a document titled “Options to Improve Tax Compliance and Reform Tax Expenditures.”

In June and July of 2004, the U.S. Senate Finance Committee conducted a hearing and roundtable discussion on charities and foundations oriented toward oversight and reform. The staff released a discussion draft of possible ways to address abuse and mismanagement, and then conducted additional hearings in April and June of 2005.

The NGO sector also was involved. In late 2004, in response to the request of the leadership of the Senate Finance committee, Independent Sector, a leadership forum for charities, foundations, and corporate giving programs, assembled leaders from the nonprofit sector to consider and recommend actions to strengthen governance, ethical conduct, effectiveness, and accountability within the sector. As a result, the “Panel on the Nonprofit Sector” was created, consisting of 24 leaders of public charities and private foundations, and supported by committees of 150 leaders.

The April 5, 2005 hearing of the Senate Finance Committee, titled “Charities and Charitable Giving: Proposals for Reform,” examined many of the proposals mentioned above: the Senate Finance Committee staff’s discussion draft, the document prepared by the staff of the U.S. Joint Committee on Taxation, and the interim report of the Panel on the Nonprofit Sector.

The results of all of these activities were numerous recommendations for regulating the sector, which are being discussed in the halls of Congress and the offices of the IRS. Among these new recommendations are: • A periodic review system be instituted to verify if a nonprofit continues to meet the qualification for tax-exemption; • A requirement be added that charitable organizations with revenues of $1 million or more conduct an annual audit and attach audited financial statements with their return; • A new requirement that the highest ranking officer sign and certify the annual information return; • An annual reporting requirement for organization with less than $25,000 in annual revenues (which currently do not have to report); • Suspension of tax-exempt status for organizations that fail to correct incomplete or inaccurate returns; • A federal accreditation program for nonprofit organizations administered by the IRS and organizations contracted by the IRS; • Although board compensation is discouraged, a requirement would be added that any such compensation would be disclosed, and the amount and reasons for the compensation revealed; loans to board members would be prohibited; • For those cases where the IRS alleges compensation to officers is excessive, the organization would have to demonstrate that it is reasonable; penalties would be increased for those individuals who receive, and managers who approve, excessive compensation; • To qualify as a public charity (versus a private foundation), at least one-third of the board would have to be independent (i.e., not have received benefits from the organization in the past year, not have compensation determined by other board or staff members, and not related to someone who received such compensation from the organization). There would be a requirement for each organization to disclose which board members are independent.

WANGO Survey

In the fall of 2005, the World Association of Non-Governmental Organizations (WANGO) took upon itself the task of conducting a survey of U.S. nonprofit leaders to access their opinion of three of these issues. WANGO also sought to understand how many of those surveyed had a code of ethics to guide their work.

The survey was conducted over the phone by a Canadian firm. A total of 103 organizations were surveyed, from a list of 848 prepared by GuideStar in the categories of international relief, international cultural exchange, human rights, refugee issues, nonprofit management, professional associations, interfaith issue organizations, and management and technical assistance organizations.

Five year review of tax-exempt status

Among the proposals being examined (including by the U.S. Senate) is a recommendation by the Staff of the Congressional Joint Committee on Taxation that every five years tax-exempt organizations, other than houses of worship, submit sufficient information to determine whether the organizations are still organized and operated exclusively for exempt purposes.

Presently, organizations seek formal recognition of tax-exempt status by submitting an application to the IRS, and the IRS issues a determination letter (ruling) that either recognizes the organization as tax-exempt or denies the recognition. (Churches, and certain church-related organizations are not required to apply in order to be recognized as tax-exempt under section 501(c)(3). Contributions are generally not deductible for income, gift, or estate tax until the determination letter is received. An organization that is recognized as tax-exempt may rely on this determination assuming “there are no substantial changes in the organization’s character, purposes or methods of operation.” There is no periodic review to check on an organizations continuing qualification for exemption. Organizations that are classified as public charities or as private operating foundations may cease to satisfy the conditions for such status based on the annual return filings.

The proposal by the Staff of the Congressional Joint Committee on Taxation is that every five years, each organization (other than churches) be required to file with the IRS information that enables a determination whether the organization continues to be organized and operated exclusively for exempt purposes, and whether the original determination letter should remain in effect, or be modified, or revoked.

WANGO Survey: Are you in favor of the tax-exempt status of nonprofit organizations being reviewed every five years by the IRS? (Yes or No or Not Sure)

No: 29 Yes: 52 Not sure: 22

In the WANGO survey of nonprofits, 50.5% of the respondents were in favor of the tax-exempt status of nonprofit organizations being reviewed every five years by the IRS. A little over one-quarter of the respondents (28.2%) were opposed to this measure, and 21.4% were not sure.

This survey does not accord with the findings of the Panel on the Nonprofit sector. The panel’s recommendation is that Congress should not mandate a periodic review system to verify if a nonprofit continues to meet exempt qualifications, but the IRS should focus on current financial returns. Board of directors is encouraged to do a full review of their organizations every five years.

Annual Information Return

Another proposal being considered by the US Congress is that those tax-exempt organizations that currently are not required to file an annual tax return with the IRS because of low revenues be required to file an annual information return with the IRS.

At present, organizations whose gross receipts in each taxable year normally are $25,000 or less are exempt from filing requirements to the IRS. (Also exempt are other organizations, such as churches, certain mission societies, church-affiliated elementary and high schools, etc.). Under this proposal, even those organizations whose revenue are below a certain specified amount would still need to furnish a notice to the IRS containing various information, such as the legal name of the organization, mailing and internet address, name and address of principal officer, mission statement, total revenues and expenditures for the year, and so forth.

The Panel on the Nonprofit Sector expressed support for this, because of the lack of current contact information for many of these organizations in the IRS database and the need to inform such organizations of new changes, among other reasons.

WANGO Survey: Are you in favor of tax-exempt organizations that are not required to file an annual tax return, because of small revenues, filing an annual information return with the IRS, providing basic information about the organization? (Yes or No or Not Sure)

No: 31 Yes: 53 Not Sure: 19

Approximately, the same percentages were realized, with just over one-half (51.5%) in favor of this proposal, and 30.1% opposed, with 18.4% unsure.

Charity Accreditation Process

The Senate Finance Committee is also examining whether to authorize 10 million dollars to the IRS for a charity accreditation process. This accreditation of nonprofits would be administered by the IRS, as well as by other organizations contracting with the IRS. Preference for federal funding would be given to organizations that are accredited by the IRS-designated entities.

Currently, there is no federal accreditation program; rather, the charitable sector has a long tradition of self-regulation. Some charities and civil society organizations, such as hospitals and institutions of higher education, have systems of accreditation for organizations in their sector, and these standards must be met for certain benefits – such as insurance coverage, recognition of degrees conferred, access to government funding, and so forth. Some associations likewise have mandatory standards for their members, and all members are to meet those standards to retain membership or affiliation. Other associations encourage adherence to standards of conduct, but do not require this for membership. There are also watchdog groups that provide information to the public on organizations and their activities, and other institutions that offer programs to improve ethics and governance through education and training.

WANGO Survey: Do you think the IRS should be designated to establish and administer standards for the nonprofit sector, or should it be done by the sector itself, as it is the case for doctors, lawyers, and universities? (Admin. By IRS or Nonprofits)

IRS: 20 Nonprofits 83

In this case, the nonprofits were 80.6% favor of the sector establishing and administering standards, rather than the IRS (19.4%).

Code of Ethics

WANGO has established a Code of Ethics and Conduct for NGOs. This Code was developed by leaders of nonprofit organizations from throughout the world and is designed to be broadly applicable to the worldwide nonprofit community, regardless of an organization’s size and whether the organization is focused on international agendas or local community affairs. Many NGOs in the United States also follow a code of ethics for their organizations. For those involved in the WANGO survey, another question was asked:

WANGO Survey: Does your organization have a code of ethics or code of conduct to guide its activities and governance? (Yes or No)

Yes: 96 No: 7

Surprisingly, over 93% of those surveyed had a code of ethics for their organization. This may be a function of the fact that the survey was oriented towards internationally oriented, and presumably larger NGOs. The survey did not access how comprehensive the standards of these organizations are, and the standards could range from a simple conflict of interest statement to a detailed code covering all aspects of governance and finance.

Summary

For over three centuries, the nonprofit sector has been a vibrant and integral part of American society. In recent years, government encouragement of the nonprofit sector has proved to be an effective avenue for addressing societal ills. As noted by U.S. Congressman Bobby Jindal, discussing the aftermath of Hurricane Katrina, “by far the most effective relief efforts have come from private charitable aid organizations. FEMA and other state/local government agencies set up bureaucracies and red tape, while private businesses and charities moved in swiftly to alleviate the human suffering on the ground.”

As greater legislation is considered to address the serious, but occasional abuses in the nonprofit sector, it is important that government not immerse the sector in bureaucracy and red tape that will stifle nonprofit organizations’ ability to serve. Rather, any policy changes need to allow this sector to continue to flourish and innovate, and enrich the lives of people both home and abroad.

References

• Anheier, Helmut, Marlies Glasius, and Mary Kaldor. Introducing Global Civil Society. In H. Anheier, M. Glasius, and M. Kaldor (eds.), Centre for Civil Society (London School of Economics and Political Science Governance, London School of Economics), Global Civil Society Yearbook 2001. Oxford: Oxford University Press. Oxford: Oxford University Press. ISBN 0199246440.

David Horton Smith, “Grassroots Associations are Important: Some Theory and a Review of the Impact Literature,” Nonprofit and Voluntary Sector Quarterly 26(1997): 269-306.

Alexis de Tocqueville, 1966, Democracy in America. (Harper & Row, 1966). p. 485-488.

Lyman Cromwell White, International Non-Governmental Organizations: Their Purposes, Methods, and Accomplishments. (Rutgers University Press, 1951), p. 4.

Ibid, p. 14.

Simeon Baldwin, “International Congresses and Conferences of the Last Century as Forces Working Toward the Solidarity of the World,” American Journal of International Law 1 (1907), Part II: 565-578. The Burschenschaft, founded in 1815, says it has 15,000 members today.

For further reading, see John Mearsheimer and Stephen Walt, The Israel Lobby and U.S. Foreign Policy. (Farrar, Straus and Giroux, 2007).

White, p. 9.

Op. cit. The IRCC and Its Missions Abroad (1918-1923), p. 15-16 in White, p. 187.

White, p. 5.

Ibid, p. 6.

Akira Iriye, Global Community: The Role of International Organizations in the Making of the Contemporary World. (University of California Press, 2002). p. 84.

White, p. 133.

David Horton Smith, Grassroots Associations. (Sage Publications, 2002), p. 53.

Ibid, p. 58.

Union of International Associations, In International Organizations: Abbreviations and Addresses, 1984-1985. (Munich, 1985), p. 508.

Iriye, p. 129.

See Eric Hobsbawm, The Age of Extremes: A History of the World, 1914-1991. (Pantheon, 1995).

Op. cit. Harold K. Jacobson. Networks of Interdependence: International Organizations and the Global Political System. (McGraw-Hill, 1979), p. viii, in Iriye, p. 133.

Collette Chabbott, “Development INGOs,” in Boli and Thomas, p. 222-248.

Iriye, p. 141.

Op. cit. Charles Condamines, L’aide humanitaire entre la politique et les affaires," (Paris, 1989), pages 21-27 in Iriye, p. 141.

Op. cit. Kenneth Boulding, Three Faces of Power. (Sage Publications, 1989). p. 244. In Iriye, p. 159.

Smith 1997a, p. 248.

Boli and Thomas, p. 29.

Michael Edwards and David Hulme, eds., Making A Difference: NGOs and Development in a Changing World. (Earthscan, 1992), p. 16.