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quango is an organization to which a state has devolved powers and responsibilities. If, for example, there were a security firm that was upgraded to a police force or state-hired vigilante, then it would become a quango. An example of a quango is the Welsh Development Agency, which promotes business interests in Wales.
The acronym "quango" stands for "quasi-autonomous non-governmental organisation". It was coined as a joke, probably by Sir Douglas Hague, but has come into serious (yet typically pejorative) use in the UK and India. It is seldom used in America, Australia, or Canada.