Classification of NGOs

Introduction

There are four general schemes used to classify Non Governmental Organizations. These include:

• United Nations International Standard Industrial Classification (ISIC)
• General Industrial Classification of Economic Activities (NACE)
• National Taxonomy of Exempt Entities (NTEE)
• International Classification of Nonprofit Organizations (ICNO)

These are commonly referred to using their acronyms provided below. This article will attempt to provide a comprehensive review of these classification schemes.

United Nations International Standard Industrial Classification

History and Purpose

The United Nations International Standard Industrial Classification scheme, or ISIC, is not specifically used to classify NGOs, but instead, is a standard classification system adopted in 1948 to arrange entities according to their economic activity. ISIC is a basic tool for studying economic phenomena, fostering international comparability of data and for promoting the development of sound national statistical systems.

Structure

The ISIC groups establishments into 17 sections:

• Agriculture, hunting and forestry
• Fishing
• Mining and quarrying
• Manufacturing
• Electricity, gas and water supply
• Construction
• Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods
• Hotels and restaurants
• Transport, storage and communications
• Financial Intermediation
• Real Estate, renting and business activities
• Public administration and defense; compulsory social security
• Education
• Health and social work
• Other community, social and personal search activities
• Activities of private households as employers and undifferentiated production activities of private households
• Extraterritorial organizations and bodies

These 17 sections are further divided into 60 divisions. For example, the “Agriculture, hunting and forestry” section is divided into “Agriculture, hunting and related service activities” and “Forestry, logging, and related service activities.” These 60 sections are each further sub-divided. For example, “Agriculture, hunting and related service activities” is divided into “Farming of Animals,” “Growing of crops; market gardening; horticulture,” and other groups.

The ISIC has evolved over the last five decades due to the contributions of several statisticians from around the world. It is widely used, “both nationally and internationally, in classifying data according to the kind of economic activity in the fields of population, production, employment, gross domestic product and other economic activities” (United Nations Statistics Division).

ISIC classification of NGOs

The ISIC does not have a specific group or section for non-governmental organizations. Instead, these organizations are included in three broad categories: “Education,” “Health and Social Work,” and “Other Community, Social, and Personal Activities.” The “Health and Social Work” category “groups a broad range of social welfare activities from counseling to adoption assistance to rehabilitation assistance” (Salomon and Anheier 1992), while the “Other Community, Social, and Personal Activities" includes activities ranging “from trade unions to libraries, museums, and religious congregations.” (Salomon and Anheier 1992) The ISIC “excludes organizations that receive half or more of their income from fees or government support” (Salomon and Anheier 1992) due to which most US nonprofit hospitals and universities are not considered to be nonprofit (do you mean non-governmental??) organizations under the classification scheme.

Currently, the custodian of the ISIC is the Economics Statistics and Classification Section of the United Nations Statistics Division. The ISIC was last revised in 2002, and it is not reviewed periodically.

General Industrial Classification of Economic Activities

History

NACE is an acronym for 'Nomenclature générale des activités économiques dans les communautés européennes' and is also known as The General Industrial Classification of Economic Activities. It is similar to the ISIC in that it is used to classify establishments based on their economic activity. However, unlike the ISIC, NACE is used and revised by the European Community.

The NACE evolved from “Classification of industries established in the European Communities,” or NICE, which was developed between 1962 and 1963. In 1965, to cover all commercial activities, the classification of trade and commerce in the European Communities, or NCE, was created. In 1970, the first NACE, or General Industrial Classification of Economic Activities within the European Communities was compiled. (The Eurostat Concepts and Definitions Database)

Structure

The NACE has 17 sections, 31 subsections, 60 divisions, 222 groups, and 503 classes. (The Eurostat Concepts and Definitions Database) Essentially, the NACE adds two major categories to the ISIC system: “Research and Development” and “Recreation and Culture,” which was under “Other Community Service” in ISIC.

NACE’s classification of NGOs

The NACE, like the ISIC, does not categorize organizations that receive half or more of their income from governments in the nonprofit sector. The sources of funding are also used to categorize the services provided by an establishment. If resources are obtained from charitable organizations, for example, the services provided by the establishment are considered to be nonprofit. Furthermore, nonprofit organizations have to provide services, which are considered “non-market.” These include administration of cemeteries, social work, religious activity, and tourist information. (Salomon and Anheier 1992)

National Taxonomy of Exempt Entities

History

Unlike the ISIC and NACE, the National Taxonomy of Exempt Entities, or NTEE, is a classification system designed specifically for non-governmental organizations and nonprofit organizations.

The NTEE was developed by the National Center for Charitable Services in the 1980’s, and was envisioned as an alternative to the system used by the IRS to identify charitable, nonprofit organizations in the United States. It was developed with the assistance of numerous major nonprofit organizations.

Purpose

The objectives of the system were summarized by one of its founders: Russy D. Sumariwalla, who said that it:

• Facilitates the collection, tabulation, presentation, and analysis of data by the types of organizations and their activities;
• Promotes uniformity and comparability in the presentation of statistical and other data collected by various public and private agencies; and
• Provides better quality information as the basis for public policy debate and decision-making for the nonprofit sector and for society at large. (National Center for Charitable Studies)

Structure

As per the request of the IRS, which required a simpler version of the NTEE, the NTEE was revised, and called the National Taxonomy of Exempt Entities – Core Codes (NTEE-CC). This includes 400 of the original 645 categories present in the NTEE. The exempt organizations are classified under the NTEE-CC. The code was revised by “collapsing lesser-used codes.” (National Center for Charitable Studies) The NTEE – CC has ten broad categories:

• Arts, Culture, and Humanities
• Education
• Environment and Animals
• Health
• Human Services
• International, Foreign Affairs
• Public, Societal Benefit
• Religion Related
• Mutual/Membership Benefit
• Unknown, Classified

Each of these ten major groups is further divided into 17 “decile level codes,” which are then divided into centile codes. Examples of the decile codes are “Media, Communications Organizations” and “Museums and Museum Activities.” The centile codes of the “Media, Communication Organizations” group include “Film, Video” and “Television” (GuideStar).

Furthermore, the NTEE also has “Common codes” which are used to highlight the function of certain organizations. The 7 common codes are:

• Alliance/Advocacy Organizations
• Management and Technical Assistance
• Professional Societies/Associations
• Research Institutes and/or Public Policy Analysis
• Monetary Support-Single Organization
• Monetary Support-Multiple Organizations
• Nonmonetary Support Not Elsewhere Classified (N.E.C)

Examples of NTEE Funding

B114 would designate college and university level fundraising. The code is created using the common code B11 which designates “Monetary Support,” and the decile code B40 which classifies Higher Education Institutions.

To designate a general hospital one would not need to use the common code. A general hospital would be classified under E22 , where E stands for health, and the decile and centile code 22 represent a general hospital. Therefore, in this case, using only the decile and centile codes would suffice. (National Center for Charitable Services)

International Classification of Nonprofit Organizations

History

The International Classification of Nonprofit Organizations was developed by a group of scholars working on the Johns Hopkins Comparative Nonprofit Sector Project. This is the classification system recommended in the UN Handbook on Non-Profit Institutions in the System of National Accounts. The system is an elaboration on ISIC.

Purpose

The organizations classified by the ICNO share five basic similarities:

• Organized – The organization needs to be institutionalized, which does not necessarily mean that the organization needs to be recognized legally. However, it does need to have an internal structure, show a sustained pursuit of its goals, and a significant difference between members and non-members. Thus, the ICNO does not consider an unorganized gathering of individuals to be a legitimate organization.
• Private – The organizations need to be separate from the government. They can receive funding from the government, but need to maintain a structural independence. They cannot exercise governmental power.
• Self-Governing – Although an organization might be private and non-governmental, it can still be controlled by private institutions and corporations. To address this issue, the ICNO also requires its organizations to be self-governing, Thus, they need to be able to control their own activities.
• Nonprofit distributing – Organizations are free to generate profits. However, any profit must *Voluntary – Individuals must be free to volunteer. However, a contribution of time or money cannot be required by law.

Structure

The INCO groups organizations into twelve major activities:

• Culture and Recreation
• Education and Research
• Health
• Social Services
• Environment
• Development and Housing
• Law, Advocacy and Politics
• Philanthropic intermediaries voluntarism promotion
• International
• Religion
• Business and professional associations, unions
• Not elsewhere classified

These twelve groups are further divided into a total of 24 subgroups. For example, “Culture and Recreation” is divided into “Culture and Arts,” “Sports,” and “Other Recreation and Social Clubs.”

Conclusion

All four classification systems discussed in the article are similar in their structure: they define broad categories and further divide them into subgroups. However, only two are used to classify NGOs: NTEE and ICNO. ISIC and NACE are international standards used to identify all entities according to their economic activity.

References

The International Classification of Nonprofit Organizations (ICNPO). http://www.statcan.ca/english/freepub/13-015-XIE/2004000/icnpo.htm (accessed November 5, 2006).

International Standard Industrial Classification of All Economic Activities, Revision 3.1, (ISIC Rev. 3.1). http://unstats.un.org/unsd/cr/family2.asp?Cl=17 (accessed November 5, 2006).

Detailed Structure and Explanatory Notes. http://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=17&Lg=1 (accessed November 5, 2006).

Glossary: NACE Rev. 1. http://forum.europa.eu.int/irc/dsis/coded/info/data/coded/en/gl006813.htm (accessed November 5, 2006).

National Center for Charitable Statistics. http://nccs2.urban.org/ntee-cc/index.htm (accessed November 5, 2006).

NTEE Classification System. http://www.guidestar.org/npo/ntee.jsp (accessed November 5, 2006).

Salamon, Lester M. and Helmut K. Anheier. "The International Classification of Nonprofit Organizations: ICNPO-Revision 1, 1996." Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, no. 19. Baltimore: The Johns Hopkins Institute for Policy Studies, 1996.

Salamon, Lester M. and Helmut K. Anheier. “In Search of the Nonprofit Sector II: The Problem Of Classification.” Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, no. 3. Baltimore: The Johns Hopkins Institute for Policy Studies, 1992.