Not-for-profit and Governmental Organizations

The different goals of these types of organizations in comparison with for-profit organizations

Kim Cristyl R. Tumbaga BSA 3-2D April 26, 2013 Dr. Celso Jovy Torreon

Not-For-Profit and Governmental Organizations Not-for-profit organizations are an important part of society, understanding their differences from profit-making corporations is therefore important. Nonprofit organizations differ from public and private corporations in that they do not exist with the goal of making a profit for distribution to shareholders. Nonprofits are formed for the public good, whether as charities, political groups, or educational, artistic or scientific organizations. They do not issue stock and are controlled by members or boards of directors. Not-for-profit organizations (NFP) include private nonprofit corporations (such as hospitals, institutes, private colleges, and organized charities) as well as public governmental units or agencies (such as welfare departments, prisons, and state universities). On the other hand, profit-making corporations have the expressed goal of making a profit. Many owners invest profits back into their business and keep a portion for themselves and/or invest in their employees.

The Different Goals of Not-For-Profit and Governmental Organizations In Comparison With For-Profit Organizations Differences Purpose Not-for-profit Organizations Operate primarily for specific needs of the community, group, organization or its membership. Owned by the organization, and, in a way, owned by the public. It belongs to no private person.
Non-stock Non-profit organization

For-profit Organizations Generally founded to generate income for entrepreneurs and their employees

Ownership

Owned by an individual proprietor or investors/stockholders.

Non-stock For-profit organization Stock For-profit organization

Sources of Funds

Rely almost entirely on donations and grants from individuals, government entities and organizations. They may also engaged in income generating activities that are eventually plowed back to program operation. Resource providers do not expect to receive either repayment or economic benefits proportionate to the resources provided.

Totally dependent on sales of its product or services to the customer for revenue.

Expectation of Resource Provider Human Resource Consideration

Allows a business owner to realize and receive gains from the organization if the business becomes successful.

usually employ a small workforce and a large corps of volunteers

staffed with salaried and hourly employees

A non-stock non profit organization is a type of corporation which may be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic services, or other similar purposes such as trade, industry, agricultural and like chambers. It operates primarily for specific needs of the community, group, organization or its membership. In order to survive, nonprofit organizations must ensure that there is a surplus of revenues over expenses. Most of NPOs revenues came from funds contributed, donated, granted or given as other forms of support. NPOs, as the term suggests, does not necessarily mean that they make no profit but these organizations are not set up for the sole purpose of making a profit. And since these organizations are in a way owned by the general public, no part of its income is distributable to its members, trustees or officers and any profits earned by such corporation as an incident to its operations shall be used for the furtherance of the purposes for which it was organized. On the other hand, for-profit organizations, such as non-stock for profit (partnership) and stock for-profit are owned by investors or stockholders that expect return from their investment. The table on the previous page summarizes the difference between NPOs and For-profit organizations in terms of purpose, ownership, source of funds, the expectations and in terms of human resource. For better understanding and illustration of these differences, the following are examples of NPOs with their goals as organization.

Traditionally, studies in strategic management have dealt with profit-making firms to the exclusion of nonprofit or governmental organizations. This, however, is changing. Increasing numbers of not-for-profit organizations are adopting strategic management, thus knowing these key differences will help in understanding how its affect the strategic management process.

References: Wheelen, Thomas and J. David Hunger. Strategic Management and Business Policy, 13th edition. 2012. Liz, Ma. Delia M., et. al. Accounting for Governmental, Not-for-profit Organizations and Specialized Industries. 2013 Edition.
http://www.punongbayan-araullo.com/pnawebsite/pnahome.nsf/section_docs/TI266Y_24-1105 http://www.pinoylawyer.org/t3434-non-stock-for-profit-corporation-registration-with-sec