Final answer:
A key characteristic indicating that an entity is a government rather than a not-for-profit is that its primary source of revenue is from taxes. Governments have taxation authority, whereas not-for-profits rely on donations and service fees, distinguishing the two types of entities in how they generate funds.
Step-by-step explanation:
You are trying to decide if an entity you are reviewing is a government or a not-for-profit. One key characteristic that would indicate it is a government entity rather than a not-for-profit is if a primary source of revenues is taxes. Unlike not-for-profits, which may rely on donations, grants, and service fees, governments have taxation powers that serve as their main source of revenue. This fundamental difference in revenue generation is a significant indicator because it shows the entity has the authority to levy taxes, which is a characteristic unique to governmental institutions.
Government agencies such as the U.S. Department of Education or the U.S. Department of Defense do not face competition in the marketplace and cannot go bankrupt in the same way private-sector firms can. Similarly, one cannot choose to pay their income taxes to an alternative agency if they are dissatisfied with the Internal Revenue Service (IRS). Thus, the nature of how a government agency raises revenue and its non-reliance on market forces are in stark contrast to not-for-profit operations.