What is a Nonprofit Agency?

A nonprofit agency, sometimes called a nonprofit organization, is an organization whose function is something other than creating income, like a commercial corporation does, or administering a population, as a government does. A nonprofit agency might actually create a profit, but these funds generally are used to assist other entities than the agency itself. Beneficiaries of nonprofits might include charities, educational institutions, religious groups, the arts, athletics, consumer protection groups and others not well supported by government or private industry.

In many countries, nonprofit agencies are exempt from taxation. A nonprofit agency must operate within specific guidelines to remain eligible for this exemption. Operating a nonprofit agency requires specialized skills unlike those required for other large organizations. Compounding these challenges, nonprofits often can’t reward officers with the sorts of perks common to for-profit entities of similar size. It’s a rare person who is willing to expend the energy to keep a nonprofit agency running and to accept the sometimes frugal rewards that come with it.

Nonprofit agencies provide essential infrastructure to countries around the world, supporting those pursuits and individuals often overlooked by government or for-profit organizations. This activity can manifest in the form of arts grants, public television and radio stations, medical charities, educational scholarship funds, aid to impoverished families and children or animal protection, to name just a few examples. Trade unions, religious organizations and public health initiatives also are considered nonprofit agencies.

Many nonprofit agencies are supported by fundraising and donations, and in some countries, including the United States, income donated to these groups is not taxed. Consequently, they often are used by wealthy individuals and corporations who want to reduce their tax burden while gaining the personal and social benefits of aiding a worthy cause. These tax exemptions often result in a sort of double oversight of nonprofit agencies, from governing bodies as well as from their own administration. Many nonprofits represent themselves on the Internet with .org domain names to differentiate themselves from the .com designation used by commercial organizations.

Well-known nonprofit agencies have included include the International Red Cross, Oxfam, the Public Broadcasting Service (PBS), the World Wildlife Fund, Habitat for Humanity and Consumers Union. The cultural, humanitarian and social contributions of organizations like these are impossible to calculate. To offer an example, the Red Cross had an operating budget of more than $1 billion US Dollars in 2009. Only 10 percent of that went to the agency’s operating expenses; the remainder went to humanitarian aid around the world.