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Non-profit organizations and
their methods of financing
An analysis of CEE countries
Bachelor Paper I
Submitted by: Nina Schmiedt
Matriculation No.: 1210633877
at: Bachelor Program
Business Consultancy International
International Accounting and Finance
Supervisor: Sarah Romero, M.A.
Wiener Neustadt, 20.12.2014
II
Table of contents
1) Introduction..............................................................................................1
1.1 Research context....................................................................................1
1.2 Structure and Methodology ......................................................................2
2) NPOs in CEE..............................................................................................3
2.1 Development..........................................................................................3
2.1.1 Austria.............................................................................................3
2.1.2 Germany..........................................................................................4
2.1.3 Czech Republic .................................................................................5
2.1.4 Slovakia...........................................................................................6
2.1.5 Poland .............................................................................................7
2.2 Roles/main tasks ....................................................................................8
2.2.1 Austria.............................................................................................8
2.2.2 Germany..........................................................................................9
2.2.3 Czech Republic ...............................................................................10
2.2.4 Slovakia.........................................................................................11
2.2.5 Poland ...........................................................................................12
2.3 Management ........................................................................................13
2.4 Financial management ..........................................................................14
3) Financing................................................................................................16
3.1 Current sources....................................................................................16
3.1.1 Austria...........................................................................................16
3.1.2 Germany........................................................................................16
3.1.3 Czech Republic ...............................................................................18
3.1.4 Slovakia.........................................................................................19
3.1.5 Poland ...........................................................................................20
3.2 Cross-country comparison .....................................................................20
3.3 Alternative sources ...............................................................................24
4) Summary of Findings and Conclusion .........................................................26
5) Table of abbreviations..............................................................................28
6) Table of Figures.......................................................................................29
7) Bibliography ...........................................................................................30
1
1) Introduction
1.1 Research context
Non-profit organizations (NPOs) play an important role in our everyday lives. In
Austria, for example, they are quite well established, but there are many other
countries where they are still struggling to be acknowledged.
If we look more closely at the organizations around us we realize that there are quite
many non-profit organizations which we have never recognized as such.
For example, many sports clubs (in German: Vereine) are non-profit organizations.
They are also found in the health sector.
Probably the most famous research done on the third sector is the Johns Hopkins
Comparative Nonprofit Sector Project, which investigated the development, activities
and financing of 22 selected countries. Its aim was to draw attention to the non-profit
sector.
According to the Gale Group (2008), the legal definition of non-profit
organizations is “A corporation or an association that conducts business for the benefit
of the general public without shareholders and without a profit motive.”
This however, should not be misunderstood that NPOs are not allowed to make a
profit. In contrast, it is important for them to be profitable in order to fund their
projects and activities. The key thing is that their aim should be to realize their
mission, not to make a profit.
The non-profit sector has several defining criteria:
 organization or institutionalization to some extent
 structural independence from the government
 self-government
 non-distribution constraint
 volunteerism/non-compulsory
 public benefit and political non-involvement (Lés, Nalecz and Wygnanski, 2000,
17-18)
The following chart demonstrates what place NPOs take.
Organizations
Public
administration
Profit
organizations
Non-profit
organizations
Figure 1: Classification of organizations (Source: Majdanska, 2011, 5)
2
The European non-profit sector has been growing immensely during the last
years. Between 1990 and 1995 growth has been 20-30% (Anheier 02/2002a).
A big issue for non-profit organizations is their methods of financing. Government
funding of NPOs differs from country to country, and it is safe to say that it has been
declining in recent years, also due to the global economic crisis. Many NPOs have
been struggling with the question of how to finance themselves. This leads to the
following research question: How can NPOs finance themselves and which methods
are most commonly used?
This paper intends to answer this question in more detail, and tries to investigate
trends and changes in financing, as well as possible alternative funding options.
1.2 Structure and Methodology
He data was drawn from the FH databases, Research Gate and the database of
the Economic University (WU) of Vienna. In addition, Google Advanced Search was
used to find working papers by entering the names of the most quoted authors from
existing sources.
This paper provides an introduction and overview of the development of NPOs
in various Central Central- and Eastern European countries and their main tasks and
projects. It analyzes means of funding and changes over time. Additionally, it tries to
give explanations for varying funding patterns among different countries. The paper
provides a short overview of the management of NPOs and looks at alternative
funding options.
The most important research done on NPOs is summarized in the working
papers of the Johns Hopkins Comparative Nonprofit Sector Project. An overview of the
results of this project will be discussed in chapter 3.2. The research was conducted
during the late 1990s, and while most likely the majority has not changed, some of
the figures might be slightly outdated. However, it has to be mentioned that the
search for current data was not successful for some countries.
Another problem was the fact that criteria for evaluating NPOs in different
countries were and still are not standardized. The paper attempts to provide a
meaningful description of each country by focusing on what is considered essential
information based on relevant sources.
3
2) NPOs in CEE
2.1 Development
2.1.1 Austria
Austrian NPOs go back to the turn of the 19th
century. Until 1914 there was an
absence of a public social security system and the necessity of the working class to
save. Therefore the most important types of NPOs were charitable societies and
savings clubs (Vaceková and Svidroňová, 2013, 9).
In the years between World War I and World War II, fascism entered Austria and thus
it began to appear in NPOs’ history and reports, especially in the case of sports
associations (Simsa et al. 2006, 28 in Neumayr et al., 2007a, 1).
In 1934 the Social Democratic Party and all its associations were forbidden and
caused the growth of NPOs to stop temporarily.
During the Austro-Fascism (1933-1938) all organizations whose goals were not in line
with the policy were forbidden. Jewish organizations were shut down, and the
remaining associations were adjusted to fit nationalistic goals. Membership in those
organizations was partly obligatory (Neumayr et al., 2007a, 1).
After the wars the reintroduction of NPOs happened in close cooperation with
political parties - either the Social Democratic Party (SPÖ) or the Austrian People’s
Party (ÖVP) (Neumayr et al., 2007a, 1).
Due to the Catholic Church retreating from public affairs, several NPOs became closely
linked to the ÖVP (Vaceková and Svidroňová, 2013, 9).
Nowadays, NPOs have a huge influence on politics. This fact is also known as Austria’s
corporatist system. This means that beside the political parties, also the labor
movement, professional associations, and NPOs enjoy representation (Neumayr et al.,
2007a, 1).
In 1973 there were already numerous registered associations to help
disadvantaged people (i.e. drug addicts), as well as self-help groups and service
delivering associations (Vaceková and Svidroňová, 2013, 9).
In the early 1990s several refugee help associations were formed due to the war in
the former Republic of Yugoslavia (Neumayr et al., 2007a, 2).
New initiatives within NPOs emerged in 2000 with the protests against the new right-
wing-oriented government (Schneider et al., 2007 in Vaceková and Svidroňová, 2013,
9-10).
According to Vaceková and Svidroňová (2013, 12) there are four main types of
NGOs in Austria nowadays:
 the association (Verein), which is the strongest type
 the foundation (Stiftung)
 the public benefit organization (gemeinnützige Kapitalgesellschaft)
 the cooperative (Genossenschaft)
Austrian NPOs, especially those in Vienna, show a high activity in social services.
4
About 23% of NPOs are represented in the field of education, 18% in arts and culture
and 15% in the health sector (Vaceková and Svidroňová, 2013, 13-14).
2.1.2 Germany
The third sector in Germany has had a long tradition, and represents an integral
part of society.
The first hospital foundations and culture and sports associations already
appeared in the middle ages. Charitable organizations of the “Free Welfare society”
(Freie Wohlfahrtsverbände) gained in size and importance during the 70s of the last
century (Priller and Zimmer, 2001, 14).
These organizations date back to the social-charitable associations that were founded
in Germany in the second half of the 19th
century and were already during the
monarchy gradually included into the public-social system.
During the Weimar Republic (Weimarer Republik) (1919-1933) these organizations
formed umbrella organizations and therefore, the third sector already had a close
relationship with the state in the 1920s (Zimmer and Priller, 2001, 33).
Most self-help organizations emerged in the 1980s and 90s and were noticed through
their dynamic development.
The development of the non-profit sector was characterized by innovations with
regards to organizational structure, change of work methods, as well as differences in
importance and impact over time.
These factors brought the third sector to its current status, and led to the creation of
three main principles:
 Principle of self-governance
 Principle of subsidiarity
Private NPOs are acknowledged as self-governing and guaranteed financial
grants. It became especially important after World War II.
 Principle of public benefit
The goal cannot be to make profit, but rather fulfilment of a social mission
(Priller and Zimmer, 2001, 14-15).
Nowadays, the non-profit sector fulfills important criteria, such as the ability to
social self-governance, the formation and support of community spirit and the
development of civil engagement and competence (Priller and Zimmer, 2001, 33).
The structure is characterized on the one hand by highly formalized,
hierarchical organizations (i.e. societies, unions) and on the other hand by small
unifications such as associations and self-help groups. The development of
organizations was highly dynamic, especially in the fields of sports, culture,
environment and social services.
5
After the fall of Communism and with the reunification East- and West-
Germany, there has been a boom of new organizations. Since 1990 the number of
associations has been rising dramatically (Priller and Zimmer, 2001, 33-34).
The development of the non-profit sector in East-Germany is very different in
size and structure from other post-communist countries. This is due to the fact that
West-German structures and guidelines were adopted rather than having to start from
scratch.
The principle of subsidiarity was extended to the Eastern Federal States in the fields of
health and social services. Furthermore, significant financing was provided, in order to
create the non-profit infrastructure in the core areas of the “Free Welfare societies”
and in the fields of sport, recreation and culture (Priller and Zimmer, 2001, 37).
However, the sector also has several problems. The highly professional parts of
the sector (unions, societies) are seen as public institutions, and therefore do not
attract volunteers or donations. In addition, several organizations were just
transferred from West to East-Germany, and had problems being integrated into the
community.
In East-Germany the focus is still more on health, education and culture – a sign of
post-Communism. This fact appears to have slowed down their overall development
(Priller and Zimmer, 2001, 38).
There is continuous growth in the NPO sector, especially in the areas of sports,
environment and international activities. This growth, as well as the continuous
development can only be achieved, if the State sets certain parameters in favor of
NPOs (Priller and Zimmer, 2001, 43-44).
2.1.3 Czech Republic
The Czech non-profit sector lags behind those of Central countries with regard
to size and importance (Brhlikova, 2004, 3).
Its development began in the middle ages and reached its peak in the period of the
first Czechoslovak Republic (1918-1939). Back then NPOs were active in fields like
national interests, health, education and social services (Brhlikova, 2004, 7-8).
The shift started in 1939 under the German occupation. As in Austria, many
NPOs were banned and the rest were reorganized to serve state purposes.
Activities were renewed after World War II, but soon thereafter NPOs became
influenced by the Communist Party.
Further evolution of the Czech non-profit sector was blocked by the Communist
Regime from 1948 to 1968 (Brhlikova, 2004, 8)
Associations were unified under “voluntary organizations” called the National
Front, membership demonstrated loyalty to the State (Fric and Goulli 2001 in
Brhlikova, 2004, 8).
6
Some organizations were re-established during the Prague Spring. However,
with the invasion of the Warsaw Pact countries and the “normalization period”, the
conditions returned to the pre-1968 state. This lasted until 1989. The main focus of
the State was again on health, education and social care. This was provided by so-
called budgetary and subsidiary organizations. These organizations basically re-
created the non-profit sector after Communism and the sector is still developing
(Brhlikova, 2004, 8-9).
However, growth rates significantly declined after the initial boost in 1991
(Brhlikova, 2004, 23).
Figure 2: Growth of the Czech non-profit sector, 1991-1998. Based on data from Brhlikova,
2004, 23.
2.1.4 Slovakia
The development of the third sector began during the Austro-Hungarian Empire
(1867-1918). Back then charities, voluntary organizations and self-help groups
existed to provide social and health services to the poor (Vaceková and Svidroňová,
2013, 5).
After that, the first NPOs were related to charitable activities and created by the
church. Unfortunately most of these organizations ceased to exist in the post-
revolutionary years from 1848 to 1849.
The country underwent eight currency and nine constitutional reforms. With the fall of
Communism, the third sector began to thrive again in November 1989, many NPOs
entered the market and the number of volunteers also increased. The new
government in 1997 imposed several rules and regulations, which severely limited
Slovak NPOs which, yet again, led to a severe reduction of these organizations.
Following the 1998 elections, legal and economic conditions became more favorable
again. NPOs were and still are encouraged by the government. The most current issue
is the fight for a non-governmental, independent representative of the non-profit
sector (Vaceková and Svidroňová, 2013, 7-8).
141%
3.70%
10.50%
2%
1991 1996 1997 1998
7
The following chart shows the percentage of growth over the last 11 years.
2.1.5 Poland
Poland has a long tradition of civil society, beginning in the Old Polish area,
which ended in 1795. During this period, the development of charity, philanthropy and
voluntary organizations began (Lés, Nalecz and Wygnanski, 2000, 2). The Roman
Catholic Church played an essential role in providing education and therapy (Lés,
Nalecz and Wygnanski, 2000, 3). Poland lost its sovereignty and was occupied by the
Russians, Germans and Austrians and adopted their political, social and economic
reforms (Lés, Nalecz and Wygnanski, 2000, 6).
During World War II Germany occupied Poland and most of the voluntary
organizations were suspended, with the exceptions of the Polish Red Cross (PRC) and
the Central Welfare Council (CWC) (Lés, Nalecz and Wygnanski, 2000, 8).
After the World War, from 1945, strong associations were developed, but legal and
underground political opposition was suppressed until 1948. Nevertheless, voluntary
organizations aiding war victims, repatriates and migrants were able to act relatively
freely.
Between 1948 and 1989 Poland was under Communism, a period very unfavorable to
voluntary organizations, most of which were forbidden (Lés, Nalecz and Wygnanski,
2000, 9).
The role of the Roman Catholic Church, which was one of the few institutions not
dependent on government financial support, increased in the 1980s in providing
welfare work and relief aid. In the 1980s two trends emerged: the activities of several
communist organizations declined, but independently organized civic initiatives
increased. During this time, foundations were re-established as well.
With the fall of Communism starting in 1992 the number of Polish foundations nearly
doubled, while associations quadrupled. Only at the end of 1990s growth slowly began
to decline (Lés, Nalecz and Wygnanski, 2000, 11-12).
171.48%
12.32%
189.12%
103.98%
-6.58%
110.43%
153.69%
Figure 3: Percentage change by NPO type, SK, 1999-2010. Based on data from
Strečanský (2012/2013, 77).
8
2.2 Roles/main tasks
2.2.1 Austria
There are several different definitions for the main tasks of NPOs. Explaining
every single one of these is beyond the scope of this text. Kramer (1981), Kendall
(2003), Salamon et al (2000a), and Frumkin (2002) identified three main functions in
Neumayr, et al. (2007b, 5): the service, the expressive, and the advocacy function.
Another one was determined by Kendall (2003) and Salamon et al (2000a) in
(Neumayr et al., 2007b, 5): the community building function.
I decided to stick to the identification made in Neumayr et al. (2007b, 5) with
the three main functions of service delivery, advocacy, and community building. This
definition seemed to be an adequate and precise summary of the main tasks in
Austria.
 Service delivery refers to the economic subsystem and describes the pricing
and paying for outputs by beneficiaries or public or private organizations. This
function is mostly represented in the health care, educational, and scholarly
system (Neumayr et al., 2007b, 6-7).
 Advocacy refers to the political subsystem. It stands for the contribution to
political decision making and governance. It can have a very wide range from
formal contribution to legislation, as well as from informal lobbying to PR
campaigns. Direct advocacy relates to political campaigns and legislative
activities (public advocacy) whereas indirect advocacy signifies workshops in
schools (citizen’s advocacy) (Neumayr et al., 2007b, 7).
 Community building can be in the form of giving more strength to groups.
This is referred to as “bonding groups” (Neumayr et al., 2007b, 7). The other
function is “bridging groups” (Neumayr et al., 2007b, 7) which involves unifying
groups or integrating individuals into a bigger group and working against
exclusion of individuals (Neumayr et al., 2007b, 7).
According to Neumayr et al. (2007b, 11-12) the most important function
measured in terms of judgment of managers in NPOs is the service function, followed
by the community building function, with the advocacy function bringing up the rear.
75% of all labor is dedicated to the service, 19% to the community building,
and 7% to the advocacy function, when the importance of these functions is
measured in terms of working hours dedicated to each function (Neumayr et al.,
2007b, 12).
9
2.2.2 Germany
With regard to size and role of the third sector in Germany, the following results
were found:
 It is an important economic force
The third sector in Germany is bigger than in other countries and members of
society are very willing to volunteer in NPOs.
 It is significant to the labor market
Germany’s non-profit sector accounts for approximately 5% of total
employment, excluding agriculture. Counting in voluntary labor, this percentage
rises to 8%.
Figure 4: Non-profit employment comparison, GER (Source: Priller and Zimmer, 2001, 18)
 It provides a significant amount of welfare goods and fulfills an
important integration function
The non-profit sector provides for example hospital beds, or places in nursery
homes and kindergartens.
It is active in integrating citizens into the community and works towards
community participation, integration and socialization in order to further
develop democracy.
 According to size it meets the international average, but the sector is
smaller than in several European countries and the USA.
The German third sector lies slightly above the average of the 22 countries
participating in the Johns Hopkins Project (Priller and Zimmer, 2001, 15-20).
The two biggest fields for NPOs in Germany are social services and health, with
38.8% and 30.6% employment, respectively. In total, 70% of employment and 62%
of expenditures are attributed to these two areas. The reason for such high figures in
these two fields is the effect of the principle of subsidiarity, meaning the state is
obligated in these fields to work very close with NPOs and subsidize them.
TRANSPORT
PRINTING INDUSTRY
CHEMISTRY
PUBLIC SERVICES
TEXTILE INDUSTRY
NON-PROFIT SECTOR
4.90%
2.80%
1.90%
1.70%
1.30%
4.90%
10
In contrast, the areas of sports and recreation do not have such a close
relationship to the state and are supported more by volunteers (Priller and Zimmer,
2001, 23-24).
The sector of health and recreation is supported by the most voluntary workers
(Zimmer and Priller, 2001, 38).
Overall, future prospects look quite bright for the German non-profit sector.
56% of companies that were interviewed in the course of the Johns Hopkins Project
expect it to grow and 22% expect it to stay the same (Priller and Zimmer, 2001, 42).
2.2.3 Czech Republic
The main function in the Czech Republic are service delivery, advocacy and
community building (Neumayr et al., 2007b, 6-7). According to Neumayr et al.
(2007b, 11-12), the most important function in the Czech Republic is the service
function (42%), followed by advocacy and community building.
Measured in terms of working hours, the ranking can be portrayed as service function
(56%), community building (33%) and advocacy (11%).
Czech NPOs focus mainly on sports and recreation, and not so much on social
services. Therefore advocacy and community building are more relevant. This has
historical reasons as this function has been covered by the government in the
previous regimes (Neumayr et al., 2007b, 15).
Czech NPOs try to distance themselves from political parties (Hyánek and Pospíšil,
2007 in Neumayr et al., 2007b, 16). This has historical roots stemming from the
Communist Era (Neumayr et al., 2007b, 16). Furthermore, citizen’s advocacy through
media is virtually non-existent in the Czech Republic. Indirect methods of influence
OTHER FIELDS
INTERNATIONAL ACTIVITIES, CITIZEN…
HOUSING AND EMPLOYMENT
ECONOMIC- AND LABOUR SOCIETIES
CULTURE AND RECREATION
SOCIAL SERVICES
HEALTH
EDUCATION
1.10%
2.50%
6.10%
3.90%
5.40%
38.80%
30.60%
11.70%
9.00%
6.10%
4.40%
4.20%
19.70%
27.20%
21.80%
7.60%
paid employees and volunteers only paid employees
Figure 5: Paid employees and volunteers by field, GER, 1995 (Source: Priller and Zimmer, 2001,
27)
11
like workshops in schools or educational work are preferred (Neumayr et al., 2007b,
17-18).
Referring to the two types of community building given by Neumayr et al.
(2007b, 7), “bonding”, so bringing people together, is much more important in the
Czech Republic than “bridging”. A reason for this could be that the majority of Czech
NPOs are active in culture, recreation, sports and education, which is populated by
membership organizations (Neumayr et al., 2007b, 19).
After having been abolished by the Communist Regime, the third sector is not yet
settled and in most NPOs there is not an emphasis on just one field (Neumayr et al.,
2007b, 14). Since 1989 work has been done on building organizations, but the
position of Czech NPOs is not yet taken for granted, therefore community building still
remains high (Neumayr et al., 2007b, 19).
Volunteerism is much less common than in Central countries because during
Communism it was seen as loyalty to the regime. Nowadays NPOs are concentrating
on educating volunteers (Brhlikova, 2004, 24-26).
2.2.4 Slovakia
The Slovak non-profit sector is constantly growing, at the moment there are
40,000 registered NPOs (Strečanský, 2012/2013, 77).
There are six main types of NPOs in Slovakia:
 civic associations
 foundations
 non-investment funds
 public benefit organizations (Vaceková and Svidroňová, 2013,11)
 church-based organizations
 Associations of Land and Home-Owners (Strečanský, 2012/2013, 76)
The most common types are civic associations and foundations, both working
towards a public benefit, especially for municipalities, schools, hospitals, and
individuals (Strečanský, 2012/2013, 77-78).
Slovak NPOs are mostly found in the sectors of sports and recreation, followed
by hospitals, social care, cultural activities, and environmental protection (Strečanský,
2012/2013, 79).
Strečanský (2012/2013, 79-80) identifies six main functions:
 Watchdog: An important barrier against authoritarian tendencies.
 Alternative public policy development: In the 1990s, think-tanks and
policy institutions emerged. They covered specifically the areas of economic,
12
privatization, legal reform, public administration, and environment.
 Advocacy: Promote either interests and/or rights of certain groups of citizens,
or boost specific issues such as environmental protection, foster care, human
rights, and antidiscrimination issues.
 Innovation: Social innovations, i.e. Roma teaching assistants in schools, self-
help groups for women recovering from breast cancer operations, alternative
schools (Bútora-Bútorová- Strečanský 2012:30 in Strečanský 2012/2013, 80).
 Service provision: Especially in social care for people with special needs,
elderly, children, sick people, and in the educational sector.
 Humanitarian and development: Both domestic and abroad, they promote
social spirit by raising public awareness of local, regional, or global
responsibility, and improving solidarity to those in need.
Especially in the areas of social affairs and education, NPOs are perceived as
competitors for for-profit organizations, since they may provide better and alternative
services (Strečanský 2012/2013, 80).
Approximately half the people working in the non-profit sector are volunteers
(Vaceková and Svidroňová, 2013, 12).
2.2.5 Poland
The main types of organizations of the Polish non-profit sector are:
 associations and other social organizations
 labor unions
 foundations
 professional, business and employer organizations
 church-based institutions (Lés, Nalecz and Wygnanski, 2000, 12-13)
The main activities of Polish NPOs nowadays are in the fields of social services,
education, and sports and recreation (Lés, Nalecz and Wygnanski, 2000, 23).
Other activities include work to support the development of local communities,
science, education, coaching, and upbringing (Majdanska, 2011, 8)
One type of non-profit organizations, the co-operation (called co-op) works
mainly to solve the problem of unemployment for young people, women, disabled, ex-
prisoners, alcoholics, former narcotic and drug addicts, and refugees (Chyra-Rolicz,
2008, 2). They help with reintegration into normal life, provide social and financial
help, health-care services, training, education, and cultural services (Chyra-Rolicz,
2008, 3-5).
13
Several NPOs try to operate globally, as well. Globalization also led to new
challenges: the weakness of global institutions, new pressure on increasing activities
and responsibilities, new forms of global poverty and crises (Dománski, 2008, 247 in
Fudalinski, 2014, 85).
The biggest challenge is the relationship between civil society and the State.
Increasing commercialization of social services over partnerships between public and
non-profit providers can be observed in social welfare delivery.
This commercialization also led to the erosion of the service function of Polish NPOs in
recent years (Lés, Nalecz and Wygnanski, 2000, 21-22).
2.3 Management
Due to financial uncertainties NPOs are currently facing, they tried to find
solutions to financial challenges by assessing management methods of regular
enterprises and commercial corporations (Anheier, 2000b, 4).
NPOs are improving the accountability and reporting of their financial situation,
are increasingly looking at tax requirements, and improved their methods of fund
raising (Anheier, 2000b, 5).
Commercial companies have only one goal: maximizing shareholder wealth by
maximizing profits. This does not hold true for NPOs which have several goals
(Anheier, 2000b, 6). They operate in areas such as social services for the disabled,
socially excluded or minorities, as well as hospices, or humanitarian organizations.
Therefore, NPOs are actually much harder to manage and/or to find a managing
strategy for, than commercial companies (Anheier, 2000b, 7).
The “key to non-profit management” (Anheier, 2000b, 9) is to regard these
organizations as a system incorporating different parts with various tasks. Only then
is it possible to assess dimensions in these companies as choices conducted or not
conducted by their managers or by another regulatory body (Anheier, 2000b, 9).
In addition, there is not only one suitable approach towards centralization/
decentralization for each and every part of an NPO. The most efficient approach varies
from department to department. For example: controlling and fund raising are most
efficient when centralized, whereas efficiency in various other departments of the
organizational task environment is the same, no matter if centralized or decentralized
(Anheier, 2000b, 9).
14
2.4 Financial management
At first glance financial management of regular companies and NPOs appears to
be the same. However, especially considering the net working capital requirements,
and the elements influencing it such as cash tied up in accounts receivable,
inventories, the early settlement of accounts payable and operational cash balances,
there is a significant difference (Michalski, 2012b, 83).
There are three policies to manage accounts receivable:
 restrictive policy (small levels of accounts receivable in relation to expected
revenues, smaller operational costs, higher level of operational risk  higher
cost of capital)
 flexible policy (large levels of accounts receivable in relation to expected
revenues, smallest level of operational risk and smallest level of cash flow
under risk  lower cost of capital)
moderate policy (in between restrictive and flexible policy) (Michalski, 2012b,
91).
According to Michalski (2010) and Kim (1998) in Michalski (2012, 136), it is
important for NPOs to keep money resource in reserve.
The reasons are as follows:
 necessity of current expenses financing (transactional reason)
 fear of future cash flow uncertainty (precautional reason)
 future interest rate level uncertainty (speculative reason)
A higher risk implies a higher cost of financing (due to higher cost of capital)
(Michalski, 2012, 136).This is also linked with the level of efficiency and effectiveness
of realizing the NPO mission (Michalski and Mercik, 2011, 1).
There are three strategies for financing:
 aggressive strategy (most risk but cheapest, mainly short-term financing)
 compromise strategy (compromise between risk and costs of financing)
 conservative strategy (most expensive long-term financing, least risk)
(Michalski, 2012, 137)
The influence of the asset strategy on the cost of capital depends on the kind of
risk taken by NPOs, the financial risk from leverage, and the individual risk of the NPO
(Michalski and Mercik, 2011, 2). Some NPOs choose even higher risk and more
aggressive liquid assets solutions than regular companies.
It is advised that NPOs should first choose their liquid assets investment level and
as a result of that the liquid asset financing method. (Michalski and Mercik, 2011, 11-
12).
15
According to Foster, Kim and Christiansen (2009), there are ten funding models for
NPOs:
 Heartfelt Connector: focuses on causes that concern large numbers of people
at all income levels. Mostly found in the environmental, international, and
medical research areas.
 Beneficiary Builder: some NPOs are reimbursed for their services but also
rely on people who have benefited from their service in the past and with whom
they build a long-term relationship to receive not only regular fees, but also
donations. This model is most common in hospitals and universities.
 Member Motivator: relies on individual donations because the issue is
important for everyday life and is collectively beneficial. The major difference to
the previous model is that the Member Motivator offers or supports activities
that individuals already seek. This model is mainly found in the fields of
religion, environment, arts, culture, and humanities.
 Big Bettor: receives major grants from a few individuals or foundations in
order to finance their operations, especially for new and promising approaches
to solve known problems. This model quite commonly found in medical
research or environmental issues and problem solving.
 Public Provider: represents the classical model of public funding. NPOs work
together with government agencies to provide important social services, such
as housing, human services and education. Historically these areas were
basically funded by the government. Nowadays NPOs also look for alternative
funding sources to expand.
 Policy Innovator: developed novel methods to address various issues not yet
covered by any other sources. They seek government funding to support their
mission.
 Beneficiary Broker: competes with others to provide government-funded or -
backed services to beneficiaries. The main areas are housing, employment
services, health care, and student loans. In this model, beneficiaries can choose
from which NPO they will get the service.
 Resource Recycler: their main goal is to collect in-kind donations from
corporation and individuals in order to distribute them to recipients in need.
These goods would otherwise go to waste and/or have minimal marginal cost
and will not be distributed in markets that compete with the producer. These
in-kind donations account for the majority of revenue and these NPOs are
usually involved in food, agriculture, medical, and nutrition programs. Most of
them are focused internationally.
 Market Maker: provides a service that motivates self-less donors. They
generate revenue from fees or donations directly linked to their activities. The
main fields they operate in are health (organ donation), and environmental
protection.
 Local Nationalizer: create a network of locally based operations, focusing on
issues such as poor schools or children in need. Most of the money is raised
locally, from individual or corporate donations or special events. Only a
marginal part is received from governmental sources.
16
3) Financing
3.1 Current sources
3.1.1 Austria
According to Neumayr et al. (2007b, 22) approximately half of the income
(46.6%) of Austrian NPOs stems from public sources. This corresponds to the model
of public provider, where NPOs work together with government agencies to deliver
mainly social services.
The main division of sources of funding is between equity and borrowed capital
(Vaceková and Svidroňová, 2013, 14). Schober et al. (2010) in Vaceková and
Svidroňová (2013, 15) use the term “quasi-equity” to make up for the fact that NPOs
do not have any equity in the economical sense of the word. Equity-like features are
made up by donors, providers of subsidies, and members (Vaceková and Svidroňová,
2013, 14-15).
This “quasi-equity” can further be separated into non-profit income (comes
from funders and is related to the mission/goals of NPOs) and standard commercial
income (income from investing activities or effect of yield of capital, not related to the
mission of NPOs). Borrowed capital can be separated into common bank loans and
other subsidized borrowed capital (i.e. loans that are designed specifically for NPOs
and issued by the government) (Vaceková and Svidroňová, 2013, 15).
According to Neumayr et al. (2007a, 6), the Austrian non-profit sector finances
itself at 50% through the public sector. It gets 37% of its total revenues from earned
income and 13% from philanthropy. The latter represents income from sponsors,
donors, and support from households, organizations, and other NPOs.
Concerning public funding, the most common sources are grants issued by the
government and so-called performance related contracts. For a long time,
government grants were used far more often than performance related contracts.
However, this fact has begun to change in recent years (Neumayr et al., 2007a, 6-7).
Earned income most commonly consists of service fees, sales, and membership
fees. Membership fees occur mostly in the fields of environment, unions, and
professional associations. The least important funding method in Austria seems to be
income from donations and sponsoring (Neumayr et al., 2007a, 7-8).
3.1.2 Germany
Germany’s third sector is financed through three main groups: public sources,
(membership) fees, and donations. The main source of income is subsidies from the
public sector; donations and fees are much lower. Same as in Austria, the most
common model is the one known as Public Provider. In comparison to the average of
17
Central European countries, donations and fees are below average in Germany (Priller
and Zimmer, 2001, 28-29).
The existing “partnership” between the State and the NPOs allows German
NPOs to escape the dependency on the market, an aspect with which other countries
are struggling (Priller and Zimmer, 2001, 30).
Figure 6: Financing, GER (Source: Priller and Zimmer, 2001, 30)
There are significant differences in how the respective fields of the German
third sector are financed. For example, the areas of health, education, social services,
representation of citizens, and consumer interest and international activities are
mainly financed by the State.
On the contrary, income from fees dominates in environmental protection,
culture and recreation and art and culture. Professional associations and unions are
financed almost entirely through membership fees and foundations are mainly
financed through capital investments and similar sources (Priller and Zimmer, 2001,
32).
However, a decrease in the amount of public funding has been observed,
especially considering the financial value of voluntary work. In addition, changes in
regulations and in the increasing sensitivity of the public play an important role in the
amount of public funding.
Differences in the financial situation between West- and East- Germany were
noticed. More East- than West-German NPOs had and some still have financial trouble
due to reduction in public funding, high labor costs, reduction in equity capital or
changes in selection criteria of national and federal funding (Priller and Zimmer, 2001,
40-41).
The privileged position of half of the non-profit sector through the principle of
subsidiarity, stands in contrast to the rules of the European Union, which states equal
chances for everyone. Therefore it seems very unlikely, that the health and social
services sector, which are subsidized the most, will be able to keep their market share
with the new regulations. Also on a national level there have been legal reforms with
PUBLIC SOURCES DONATIONS FEES
64.30%
3.40%
32.30%
55.60%
7.20%
37.20%
Germany Western Europe
18
regard to tax deductibility and tax treatment. In the future, the German non-profit
sector will most likely trade in its dependency on the State for a stronger market-
based orientation (Priller and Zimmer, 2001, 43).
3.1.3 Czech Republic
In the Czech Republic, approximately one third (33.5%) of the income is
derived from public sources (Neumayr et al, 2007b, 22).
Most of the income of NPOs is derived from revenues from their own activities
by the means of fees and charges. This appears to correspond best to the Beneficiary
Builder model, where NPOs derive the majority of their income from fees and
donations collected from previously serviced individuals. Another source is
philanthropy (Brhlikova, 2004, 26). This appears to correspond better to the Member
Motivator model, being funded by donations from individuals for causes integral to
everyday life.
Salamon et al. (1999, 25) describes the Czech non-profit sector as “fee
dominant”. The amount stemming from philanthropy is slightly higher compared to
Central countries (Brhlikova, 2004, 26).
Figure 7: Financing, CR (1999). Based on data from Brhlikova, 2004, 26.
There is a major problem with people’s contributions to NPOs, because most
citizens believe that paying taxes is more than enough (Brhlikova, 2004, 28).
Fric (2000) in Brhlikova (2004, 28) marks two important years, in which
donations for Czech NPOs rose: 1997 and 2002, due to heavy floods in several
regions in the Czech Republic.
Companies prefer sponsoring to donating, because sponsoring is deductible
from taxable income (Potucek et al., 2001 in Brhlikova, 2004, 29).
Czech NPOs were strongly affected by the financial crisis of 2008. This was
evident through changes in the amount and structure of private philanthropy, and the
public financing support. The Czech government cut public expenditure especially in
own
activities
47%
public
sources
39%
philantropy
14%
19
the fields of social and health care, which is unfortunate because many NPOs are
active in those fields. This influenced both financial and non-financial aspects and
strategies of NPOs (Prouzová, n.d., 1)
To ensure support from the public, as well as from individuals, Czech NPOs should
increase their degree of transparency by providing information about projects, sources of
income, costs of fundraising, property, and board members (Brhlikova, 2004, 30-31).
3.1.4 Slovakia
Slovak NPOs do not have the luxury of public support and have to rely more on
financing themselves. Private funding or donations in the form of grants and/or
membership fees, is more frequently used as a source of funding (Vaceková and
Svidroňová, 2013, 16). This is a clear indicator for the Beneficiary Builder.
Contributions and donations from the private sector have increased in recent years
(Strečanský, 2012/2013, 80).
Public funding can be classified as follows:
 Subsidies from budgetary chapters of different ministries and government
agencies
 Subsidies from the levy on the gaming industry
 Structural funds of the EU
 Bilateral aid (Norwegian, Swiss financial mechanisms)
 2% tax assignation
The most significant source of public funding is subsidies.
The 2% (now reduced to 1.5% (Strečanský, 2012/2013, 92)) tax assignation
also represents a very important source of income for NPOs. Basically, this is currently
a 1.5 percentage point reduction on income tax NPOs are paying.
The major advantage of this tax assignation is that it can be used for general
purposes and is not project bound (Strečanský, 2012/2013, 81-82).
The relationship between NPOs and the State is very complicated in Slovakia. It
took a long time until NPOs got recognized by the government, a quite frustrating
experience for them (Strečanský, 2012/2013, 85-86).
The most recent financial crisis severely impacted the relationship between
NPOs and the State. One key factor for NPOs to assure survival is proper
communication with private and public sources and counterparts, as well as keeping
the general public informed (Strečanský, 2012/2013, 88).
20
3.1.5 Poland
Unfortunately, no detailed information on percentage of different funding types
could be found for Poland.
Polish NPOs are supported by public sources and EU funds only to a certain
extent (Chyra-Rolicz, 2008, 3). In 1999, the decentralization reform along with
changes in public financing regulations led to a suspension of most of the public
support. This created the opportunity for future partnerships between local authorities
and NPOs (Lés, Nalecz and Wygnanski, 2000, 22).
The income of NPOs is tax exempt, so are most of their activities and
expenditures (Majdanska, 2011, 14)
Polish NPOs have a shorter operating cycle, less accounts receivable days and a
smaller inventory period than most companies in Poland (Michalski and Mercik, 2011,
8-9).
During the post-communist (transition) period Poland got significant support
from international governmental and non-governmental agencies, which portrayed an
important source of their income (Lés, Nalecz and Wygnanski, 2000, 20).
Nowadays however, it is almost impossible to get foreign sponsors, partly due
to the lack of experience of Polish NPOs (Fudalinski, 2013 in Fudalinski, 2014, 88).
In 1999, only 8% of countries contracted social services out to Polish NPOs, while
12% offered grants (Lés, Nalecz and Wygnanski, 2000, 22).
A good relationship with the State is crucial for NPOs in Poland, especially due
to the significant reduction in international financial support, as well as the inefficiency
of private domestic funding (Lés, Nalecz and Wygnanski, 2000, 21).
3.2 Cross-country comparison
One of the best sources for cross-country comparison is the Johns Hopkins
Comparative Nonprofit Sector Project. In the course of this project, the third sector in
selected countries was assessed based on its economic structure, as well as historical,
social, and political dimensions (Zimmer and Priller, 2001, 17).
Following is an overview of the participating countries:
Central Europe
Central- and Eastern
Europe
Netherlands Germany Czech Republic
Ireland Spain Slovakia
Belgium Austria Hungary
France Finland Romania
21
Great Britain
other industrial
countries Latin America
Australia Argentina
United States Brazil
Japan Colombia
Israel Mexico
Peru
Figure 8: Overview of countries (Source: Zimmer and Priller, 2001, 18)
The non-profit sector has several defining criteria:
 organizational structure
 structural independence from the government
 self-government
 non-distribution constraint
 volunteerism/non-compulsory
 public benefit and political non-involvement (Lés, Nalecz and Wygnanski, 2000,
17-18)
The third sector in Europe goes back to the Medieval Ages and had a big
tradition in the time of reformation, the Napoleon Era and the time of industrialization
and urbanization.
The third sector is largest in countries with a close cooperation between NPOs
and the State (Zimmer and Priller, 2001, 25).
The main focus or reason of existence varies by country or specific region
(Zimmer and Priller, 2001, 26).:
Dominant field with regards to
employment countries
Education and research
Argentina, Brazil, Mexico, Peru,
Belgium, Ireland, Great Britain, Israel
Health USA, Netherlands, Japan
Social services Austria, France, Germany, Spain
Culture and recreation
Czech Republic, Slovakia, Hungary,
Romania
no dominance Colombia, Finland, Australia
Figure 9: Dominant fields with respect to countries (Source: Zimmer and Priller, 2001, 26)
That social services dominate in Central European countries like Austria and
Germany can best be explained by the influence of the Roman Catholic Church and its
principle of subsidiarity.
Contrary, a reason for the focus on culture and recreation in Eastern European
countries could be the low establishment of NPOs in these countries as a result of the
Communist Regime (Zimmer and Priller, 2001, 26-27).
22
Concerning financing, there are three main sources of income for NPOs:
 public sector
 fees
 philanthropy (donations) (Zimmer and Priller, 2001, 27)
The survey of the 22 countries brought the following results:
Figure 10: Financing of NPOs in 22 countries, 1995 (Source: Salamon et al., 1999, 24)
Financing through fees as well as income through own activities is particularly
well established in Latin America, Central- and Eastern Europe and in Australia, Japan
and the USA, corresponding to the Beneficiary Builder model.
In Central Europe and Israel the main source of income stems from the state,
meaning subsidies and grants (Zimmer and Priller, 2001, 27-28). This constitutes the
Public Provider model.
For comparative reasons, an extract of the income statement of an American
non-profit food shelter (Food for Others) that provides food and donated items for
underprivileged and/or homeless.
Figure 11: Food for Others revenues 2013, % of total revenues. Based on data from Audited
Financial Statements 2013, 6.
Public
sector
40%
fees and
charges
49%
philantrop
y 11%
78.44%
17.20%
3.33%
Donated goods,
services, utilities
and facilities
Contributions
Government
contracts for
services
23
The majority of income is derived from in-kind donations from corporations and
individuals – a clear indicator of the Resource Recycler funding model.
The non-profit sector in general is a major economic force and accounts for a
significant share of employment (Salamon et al., 1999, 8).
To get an idea of how dominant the sector really is, the assumption was made that
the third sector in the Johns Hopkin’s countries is a country of its own. The following
tables provide an overview of the worldwide ranking under these assumptions.
Country
GDP
(trillion
$)
USA $7.20
Japan $5.10
China $2.80
Germany $2.20
France $1.50
UK $1.10
Nonprofit
Expenditures (22
countries) $1.10
Brazil $0.70
Russia $0.70
Spain $0.60
Canada $0.50
Figure 12: If NPOs were a country, GDP (Source: Salamon et al., 1999, 9)
Employment and voluntary work differs quite significantly among various
countries participating in the Johns Hopkins Project.
Figure 13: Employment and voluntary work, 22 countries (Source: Salamon et al., 1999, 13)
WESTERN
EUROPE
OTHER
DEVELOPED
LATIN
AMERICA
CENTRAL
EUROPE
7.00% 6.90%
2.20% 1.10%
10.30%
9.40%
3.00%
1.70%
Paid employees Volunteers
24
The conclusion can be drawn that the third sector, though not very well known
and in some countries not yet that well established, is not to be underestimated with
regards to economic power.
3.3 Alternative sources
Unfortunately, NPOs in general are commonly known for spending a significant
amount of money on administration (Mahapatra, 2013). Many people feel that the
majority of money donated to such institutions has no chance to reach the people in
need (Altucher, n.d.). NPOs are definitely challenged to convince donors by using
more direct means of help and proving this to their customers by the means of proper
reports (Zimmerman, Lehman, 2009).
Food for others, the U.S. organization described earlier, is based on the idea to
keep administration costs to a minimum. It relies more on companies donating food
and materials they would not be able to sell any more (Food for Others, Audited
Financial Statements 2013, 6). Companies are quite willing to engage in such efforts,
especially for a good cause. The organization is also very close to the people in need
and stays local. Interestingly enough, similar things started to happen in Austria, as
well.
One just needs to watch the news recently. There are supermarket chains
(Caritas, 2013), banks, or even radio stations who trigger new ideas like getting
donations to buy desks for students in need to give them proper working tools for
school (Herok, n.d.). There were hardly any administrative costs to the donors, the
majority of money or hardware donations went right to the people in need. In addition
there was a tremendous amount of information to the public. In short: Direct help to
the ones in need, hardly any administrative costs. Are these alternatives competing
with NPOs and/or just showing what they ought to be doing?
If NPOs want to survive, they will have to change for the better. Their major
task will be to find meaningful projects, especially local projects and advertise them
properly. People are far more willing to donate for causes happening in the vicinity
than somewhere far away (Fritz, n.d.). Activities like this correspond to the Local
Nationalizer model. In addition, any donor has one major interest: To make sure that
the donation is getting to the person and/or area in need and not “eaten” by
administrative costs (Altucher, n.d.).
Websites like Charity Navigator rate NPOs on how much of their donations they spend
on their actual projects. Globally, some of the most efficient ones were: American Red
Cross, World Vision, Doctors Without Borders, and the American Cancer Society (Delp,
n.d.).
Alternatively, NPOs can and should create projects managed by their own staff,
similar to the most recent desk-for-students quest initiated by a radio station (Herok,
n.d.). People not only donated money, but producers of desks (basically large
furniture manufacturing companies) saw this as a perfect opportunity for
advertisement and using some of their old stock - rather than having to write it off.
25
One furniture company even offered 200 desks for this project free of charge.
Basically, this is a much cheaper and more direct means of advertising and helping
people in need at the same time. Showing this type of social competence may prove
as an additional motivator for people to buy products from that company (Herok, n.d.)
Overall this represents a perfect win/win situation.
One method of financing would be to tap into the resources that supermarkets
and/or banks already have. In order to succeed, NPOs will have to market their ideas
and provide details about their projects. However, it may turn out that banks and
supermarkets are more of a competitor in the field of helping others (Caritas, 2013).
If NPOs manage to become a different type of advertising agency, they will
definitely have a much better chance to finance themselves and to help the people in
need. In addition, such efforts would also demonstrate social competence and
improve help and respect, not only in the neighborhood, but even internationally.
The most costly part of any company are usually salary cost. Another step for
NPOs would be to create projects and advertise for voluntary help. However, in order
to do so and to earn the trust of the donors and helpers, they need to improve their
public standing and provide clear proof of project costs and success. This information
needs to be made available to the public over the Internet and prove the fact that less
than 33.3% (Delp, n.d.) are used for administering the project by staff paid by the
NPO (Zimmerman, Lehman, 2009).
This type of project reporting and reduction of administrative costs might also
improve the willingness of government and the population to donate money for a
good cause (Zimmerman, Lehman, 2009).
One alternative becoming increasingly popular is the usage of Internet,
especially social media, which makes it easier to reach the required audience and
donors all over the world (Blackwell, 2013). The main ways are to pin and post the
required items on Pinterest or Facebook, give updates via Twitter on recent news, or
list examples on how people’s donations made significant differences.
NPOs can also create social media campaigns on Facebook, Twitter, or similar
networks around Thanksgiving and New Year. This is the time where people are most
willing to donate and companies have set their budgets for the next year. According to
the CEO of Animal Shelter Fundraising, U.S. NPOs receive 41% of their annual
contributions between Thanksgiving and New Year (Blackwell, 2013).
Another alternative would be to hold contests on Facebook throughout the year, like
naming a lion cub.
Last but not least NPOs should take advantage of crowdfunding. This is an online
fundraising event using an app such as FundRazr that can be shared via Facebook,
Twitter, email, blogs and websites. These strategies are easy and if planned correctly
can be very effective as fundraising tools. Their most important advantage is the
sheer endless capacity of outreach (Blackwell, 2013).
It almost looks like NPOs are under severe pressure to change their behavior,
otherwise “their” tasks will be taken over by others, like banks, supermarket chains,
TV or radio stations.
26
4) Summary of Findings and Conclusion
“How can NPOs finance themselves and which methods are most commonly
used?” Financing of NPOs relies on three main sources of income:
 public funding
 donations
 income from fees and charges
The first source dominates in Central Europe, the last one in Eastern Europe.
Country main funding method main funding model
Austria Public funding Public Provider
Germany Public funding Public Provider
Czech Republic fees and charges Beneficiary Builder
Slovakia donations and fees Beneficiary Builder
Poland not specified not specified
Figure 14: main funding method and model per country
NPOs struggle with different problems. In post-communist countries a main
problem is that NPOs are not yet well established, and that they do not have a very
good relationship to the State. The lack of voluntary contribution by citizens and
finding sources of funding represent two other problems.
Due to the economic crisis, public funding has significantly decreased, which
poses a major problem especially for Central European NPOs who depend mostly on
public funding. These NPOs will need to restructure themselves and find alternative
funding methods.
Most of the organizations suffer from the public opinion that a significant
amount of money is spent on administering themselves and only a marginal amount
ever makes it to the people in need.
NPOs need to focus on two major issues: Improving their reputation and closer
focus on the people in need. Both of these issues can only be solved by a change in
how they handle themselves and their projects. Basically, cost reduction and focus on
local issues appear to be the means for a more successful future.
In addition, clear communication of projects and publication of financial
statements on the Internet is essential. If one expects people to donate their money,
they have a right to know what it was spent on. Lack of transparency sends the signal
of having something to hide.
One option would be to increasingly use social media to advertise their projects
and required items, and convey information and create campaigns over Twitter or
Facebook. A recently very popular method are online fundraising events like
crowdfunding, using an app called FundRazr that can be shared all over the Internet.
27
Another option would be to work together with banks and supermarkets to
advertise their projects, and also to cooperate with manufacturers, who provide their
products at reduced costs in turn for being promoted. This also draws attention to
their social competence, which can be the difference between failure and success. This
scenario demonstrates a perfect “win/win” situation for everybody involved. In
addition, actions like this will assure something else: Respect and helping each other
is more important than badmouthing or challenging each other, under the motto:
Together we are stronger and can achieve anything.
28
5) Table of abbreviations
NPO ……………………………………………………………Non-profit organization
CEE …………………………………………………………..Central- and Eastern Europe
SPÖ …………………………………………………………..Social-Democratic Party
ÖVP …………………………………………………………..Austrian People’s Party
GDP ………………………………………………………….Gross Domestic Product
29
6) Table of Figures
Figure 1: Classification of organizations (Source: Majdanska, 2011, 5) ......................
Figure 2: Growth of the Czech non-profit sector, 1991-1998. Based on data from
Brhlikova, 2004, 23............................................................................................6
Figure 3: Percentage change by NPO type, SK, 1999-2010. Based on data from
Strečanský (2012/2013, 77). ...............................................................................
Figure 4: Non-profit employment comparison, GER (Source: Priller and Zimmer, 2001,
18) ..................................................................................................................9
Figure 5: Paid employees and volunteers by field, GER, 1995 (Source: Priller and
Zimmer, 2001, 27) .............................................................................................
Figure 6: Financing, GER (Source: Priller and Zimmer, 2001, 30) ..........................17
Figure 7: Financing, CR (1999). Based on data from Brhlikova, 2004, 26................18
Figure 8: Overview of countries (Source: Zimmer and Priller, 2001, 18) .................21
Figure 9: Dominant fields with respect to countries (Source: Zimmer and Priller, 2001,
26) ................................................................................................................21
Figure 10: Financing of NPOs in 22 countries, 1995 (Source: Salamon et al., 1999,
24) ................................................................................................................22
Figure 11: Food for Others revenues 2013, % of total revenues. Based on data from
Audited Financial Statements 2013, 6.................................................................22
Figure 12: If NPOs were a country, GDP (Source: Salamon et al., 1999, 9).............23
Figure 13: Employment and voluntary work, 22 countries (Source: Salamon et al.,
1999, 13) .......................................................................................................23
Figure 14: main funding method and model per country .......................................26
30
7) Bibliography
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to be a Superhero, Part 2).
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Working Paper 12, Centre for Civil Society, LSE, London, UK.
Anheier, Helmut K. 2000b. Managing non-profit organisations: Towards a new approach,
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Blackwell, Amandah. 2013. Social Media for Nonprofits: 5 Ways to Increase Donations for
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Brhlikova, Petra. 2004. The Nonprofit Sector in the Czech Republic, Czech Republic.
Caritas. 2013. "Aufrunden, bitte.". Austria.
Chyra-Rolicz, Zofia. 2008. Experiences of Social Economy in Poland - Ideas and
Practices, University of Podlasie, Poland.
Food for Others, Board of Directors, and Carter & Boyce Matthews. 2013. Audited
Financial Statements 2013. Fairfax, Virginia: Food for Others.
Foster, William, Kim, Peter, Christiansen, Barbara. 2009. Ten Nonprofit Funding Models.
Stanford Social Innovation Review.
Fritz, Joanne. 2014. Why People Don't Give to Our Causes - What We Can Do about
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32

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Non-profit organizations and their methods of financing_final version

  • 1. Non-profit organizations and their methods of financing An analysis of CEE countries Bachelor Paper I Submitted by: Nina Schmiedt Matriculation No.: 1210633877 at: Bachelor Program Business Consultancy International International Accounting and Finance Supervisor: Sarah Romero, M.A. Wiener Neustadt, 20.12.2014
  • 2. II Table of contents 1) Introduction..............................................................................................1 1.1 Research context....................................................................................1 1.2 Structure and Methodology ......................................................................2 2) NPOs in CEE..............................................................................................3 2.1 Development..........................................................................................3 2.1.1 Austria.............................................................................................3 2.1.2 Germany..........................................................................................4 2.1.3 Czech Republic .................................................................................5 2.1.4 Slovakia...........................................................................................6 2.1.5 Poland .............................................................................................7 2.2 Roles/main tasks ....................................................................................8 2.2.1 Austria.............................................................................................8 2.2.2 Germany..........................................................................................9 2.2.3 Czech Republic ...............................................................................10 2.2.4 Slovakia.........................................................................................11 2.2.5 Poland ...........................................................................................12 2.3 Management ........................................................................................13 2.4 Financial management ..........................................................................14 3) Financing................................................................................................16 3.1 Current sources....................................................................................16 3.1.1 Austria...........................................................................................16 3.1.2 Germany........................................................................................16 3.1.3 Czech Republic ...............................................................................18 3.1.4 Slovakia.........................................................................................19 3.1.5 Poland ...........................................................................................20 3.2 Cross-country comparison .....................................................................20 3.3 Alternative sources ...............................................................................24 4) Summary of Findings and Conclusion .........................................................26 5) Table of abbreviations..............................................................................28 6) Table of Figures.......................................................................................29 7) Bibliography ...........................................................................................30
  • 3. 1 1) Introduction 1.1 Research context Non-profit organizations (NPOs) play an important role in our everyday lives. In Austria, for example, they are quite well established, but there are many other countries where they are still struggling to be acknowledged. If we look more closely at the organizations around us we realize that there are quite many non-profit organizations which we have never recognized as such. For example, many sports clubs (in German: Vereine) are non-profit organizations. They are also found in the health sector. Probably the most famous research done on the third sector is the Johns Hopkins Comparative Nonprofit Sector Project, which investigated the development, activities and financing of 22 selected countries. Its aim was to draw attention to the non-profit sector. According to the Gale Group (2008), the legal definition of non-profit organizations is “A corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive.” This however, should not be misunderstood that NPOs are not allowed to make a profit. In contrast, it is important for them to be profitable in order to fund their projects and activities. The key thing is that their aim should be to realize their mission, not to make a profit. The non-profit sector has several defining criteria:  organization or institutionalization to some extent  structural independence from the government  self-government  non-distribution constraint  volunteerism/non-compulsory  public benefit and political non-involvement (Lés, Nalecz and Wygnanski, 2000, 17-18) The following chart demonstrates what place NPOs take. Organizations Public administration Profit organizations Non-profit organizations Figure 1: Classification of organizations (Source: Majdanska, 2011, 5)
  • 4. 2 The European non-profit sector has been growing immensely during the last years. Between 1990 and 1995 growth has been 20-30% (Anheier 02/2002a). A big issue for non-profit organizations is their methods of financing. Government funding of NPOs differs from country to country, and it is safe to say that it has been declining in recent years, also due to the global economic crisis. Many NPOs have been struggling with the question of how to finance themselves. This leads to the following research question: How can NPOs finance themselves and which methods are most commonly used? This paper intends to answer this question in more detail, and tries to investigate trends and changes in financing, as well as possible alternative funding options. 1.2 Structure and Methodology He data was drawn from the FH databases, Research Gate and the database of the Economic University (WU) of Vienna. In addition, Google Advanced Search was used to find working papers by entering the names of the most quoted authors from existing sources. This paper provides an introduction and overview of the development of NPOs in various Central Central- and Eastern European countries and their main tasks and projects. It analyzes means of funding and changes over time. Additionally, it tries to give explanations for varying funding patterns among different countries. The paper provides a short overview of the management of NPOs and looks at alternative funding options. The most important research done on NPOs is summarized in the working papers of the Johns Hopkins Comparative Nonprofit Sector Project. An overview of the results of this project will be discussed in chapter 3.2. The research was conducted during the late 1990s, and while most likely the majority has not changed, some of the figures might be slightly outdated. However, it has to be mentioned that the search for current data was not successful for some countries. Another problem was the fact that criteria for evaluating NPOs in different countries were and still are not standardized. The paper attempts to provide a meaningful description of each country by focusing on what is considered essential information based on relevant sources.
  • 5. 3 2) NPOs in CEE 2.1 Development 2.1.1 Austria Austrian NPOs go back to the turn of the 19th century. Until 1914 there was an absence of a public social security system and the necessity of the working class to save. Therefore the most important types of NPOs were charitable societies and savings clubs (Vaceková and Svidroňová, 2013, 9). In the years between World War I and World War II, fascism entered Austria and thus it began to appear in NPOs’ history and reports, especially in the case of sports associations (Simsa et al. 2006, 28 in Neumayr et al., 2007a, 1). In 1934 the Social Democratic Party and all its associations were forbidden and caused the growth of NPOs to stop temporarily. During the Austro-Fascism (1933-1938) all organizations whose goals were not in line with the policy were forbidden. Jewish organizations were shut down, and the remaining associations were adjusted to fit nationalistic goals. Membership in those organizations was partly obligatory (Neumayr et al., 2007a, 1). After the wars the reintroduction of NPOs happened in close cooperation with political parties - either the Social Democratic Party (SPÖ) or the Austrian People’s Party (ÖVP) (Neumayr et al., 2007a, 1). Due to the Catholic Church retreating from public affairs, several NPOs became closely linked to the ÖVP (Vaceková and Svidroňová, 2013, 9). Nowadays, NPOs have a huge influence on politics. This fact is also known as Austria’s corporatist system. This means that beside the political parties, also the labor movement, professional associations, and NPOs enjoy representation (Neumayr et al., 2007a, 1). In 1973 there were already numerous registered associations to help disadvantaged people (i.e. drug addicts), as well as self-help groups and service delivering associations (Vaceková and Svidroňová, 2013, 9). In the early 1990s several refugee help associations were formed due to the war in the former Republic of Yugoslavia (Neumayr et al., 2007a, 2). New initiatives within NPOs emerged in 2000 with the protests against the new right- wing-oriented government (Schneider et al., 2007 in Vaceková and Svidroňová, 2013, 9-10). According to Vaceková and Svidroňová (2013, 12) there are four main types of NGOs in Austria nowadays:  the association (Verein), which is the strongest type  the foundation (Stiftung)  the public benefit organization (gemeinnützige Kapitalgesellschaft)  the cooperative (Genossenschaft) Austrian NPOs, especially those in Vienna, show a high activity in social services.
  • 6. 4 About 23% of NPOs are represented in the field of education, 18% in arts and culture and 15% in the health sector (Vaceková and Svidroňová, 2013, 13-14). 2.1.2 Germany The third sector in Germany has had a long tradition, and represents an integral part of society. The first hospital foundations and culture and sports associations already appeared in the middle ages. Charitable organizations of the “Free Welfare society” (Freie Wohlfahrtsverbände) gained in size and importance during the 70s of the last century (Priller and Zimmer, 2001, 14). These organizations date back to the social-charitable associations that were founded in Germany in the second half of the 19th century and were already during the monarchy gradually included into the public-social system. During the Weimar Republic (Weimarer Republik) (1919-1933) these organizations formed umbrella organizations and therefore, the third sector already had a close relationship with the state in the 1920s (Zimmer and Priller, 2001, 33). Most self-help organizations emerged in the 1980s and 90s and were noticed through their dynamic development. The development of the non-profit sector was characterized by innovations with regards to organizational structure, change of work methods, as well as differences in importance and impact over time. These factors brought the third sector to its current status, and led to the creation of three main principles:  Principle of self-governance  Principle of subsidiarity Private NPOs are acknowledged as self-governing and guaranteed financial grants. It became especially important after World War II.  Principle of public benefit The goal cannot be to make profit, but rather fulfilment of a social mission (Priller and Zimmer, 2001, 14-15). Nowadays, the non-profit sector fulfills important criteria, such as the ability to social self-governance, the formation and support of community spirit and the development of civil engagement and competence (Priller and Zimmer, 2001, 33). The structure is characterized on the one hand by highly formalized, hierarchical organizations (i.e. societies, unions) and on the other hand by small unifications such as associations and self-help groups. The development of organizations was highly dynamic, especially in the fields of sports, culture, environment and social services.
  • 7. 5 After the fall of Communism and with the reunification East- and West- Germany, there has been a boom of new organizations. Since 1990 the number of associations has been rising dramatically (Priller and Zimmer, 2001, 33-34). The development of the non-profit sector in East-Germany is very different in size and structure from other post-communist countries. This is due to the fact that West-German structures and guidelines were adopted rather than having to start from scratch. The principle of subsidiarity was extended to the Eastern Federal States in the fields of health and social services. Furthermore, significant financing was provided, in order to create the non-profit infrastructure in the core areas of the “Free Welfare societies” and in the fields of sport, recreation and culture (Priller and Zimmer, 2001, 37). However, the sector also has several problems. The highly professional parts of the sector (unions, societies) are seen as public institutions, and therefore do not attract volunteers or donations. In addition, several organizations were just transferred from West to East-Germany, and had problems being integrated into the community. In East-Germany the focus is still more on health, education and culture – a sign of post-Communism. This fact appears to have slowed down their overall development (Priller and Zimmer, 2001, 38). There is continuous growth in the NPO sector, especially in the areas of sports, environment and international activities. This growth, as well as the continuous development can only be achieved, if the State sets certain parameters in favor of NPOs (Priller and Zimmer, 2001, 43-44). 2.1.3 Czech Republic The Czech non-profit sector lags behind those of Central countries with regard to size and importance (Brhlikova, 2004, 3). Its development began in the middle ages and reached its peak in the period of the first Czechoslovak Republic (1918-1939). Back then NPOs were active in fields like national interests, health, education and social services (Brhlikova, 2004, 7-8). The shift started in 1939 under the German occupation. As in Austria, many NPOs were banned and the rest were reorganized to serve state purposes. Activities were renewed after World War II, but soon thereafter NPOs became influenced by the Communist Party. Further evolution of the Czech non-profit sector was blocked by the Communist Regime from 1948 to 1968 (Brhlikova, 2004, 8) Associations were unified under “voluntary organizations” called the National Front, membership demonstrated loyalty to the State (Fric and Goulli 2001 in Brhlikova, 2004, 8).
  • 8. 6 Some organizations were re-established during the Prague Spring. However, with the invasion of the Warsaw Pact countries and the “normalization period”, the conditions returned to the pre-1968 state. This lasted until 1989. The main focus of the State was again on health, education and social care. This was provided by so- called budgetary and subsidiary organizations. These organizations basically re- created the non-profit sector after Communism and the sector is still developing (Brhlikova, 2004, 8-9). However, growth rates significantly declined after the initial boost in 1991 (Brhlikova, 2004, 23). Figure 2: Growth of the Czech non-profit sector, 1991-1998. Based on data from Brhlikova, 2004, 23. 2.1.4 Slovakia The development of the third sector began during the Austro-Hungarian Empire (1867-1918). Back then charities, voluntary organizations and self-help groups existed to provide social and health services to the poor (Vaceková and Svidroňová, 2013, 5). After that, the first NPOs were related to charitable activities and created by the church. Unfortunately most of these organizations ceased to exist in the post- revolutionary years from 1848 to 1849. The country underwent eight currency and nine constitutional reforms. With the fall of Communism, the third sector began to thrive again in November 1989, many NPOs entered the market and the number of volunteers also increased. The new government in 1997 imposed several rules and regulations, which severely limited Slovak NPOs which, yet again, led to a severe reduction of these organizations. Following the 1998 elections, legal and economic conditions became more favorable again. NPOs were and still are encouraged by the government. The most current issue is the fight for a non-governmental, independent representative of the non-profit sector (Vaceková and Svidroňová, 2013, 7-8). 141% 3.70% 10.50% 2% 1991 1996 1997 1998
  • 9. 7 The following chart shows the percentage of growth over the last 11 years. 2.1.5 Poland Poland has a long tradition of civil society, beginning in the Old Polish area, which ended in 1795. During this period, the development of charity, philanthropy and voluntary organizations began (Lés, Nalecz and Wygnanski, 2000, 2). The Roman Catholic Church played an essential role in providing education and therapy (Lés, Nalecz and Wygnanski, 2000, 3). Poland lost its sovereignty and was occupied by the Russians, Germans and Austrians and adopted their political, social and economic reforms (Lés, Nalecz and Wygnanski, 2000, 6). During World War II Germany occupied Poland and most of the voluntary organizations were suspended, with the exceptions of the Polish Red Cross (PRC) and the Central Welfare Council (CWC) (Lés, Nalecz and Wygnanski, 2000, 8). After the World War, from 1945, strong associations were developed, but legal and underground political opposition was suppressed until 1948. Nevertheless, voluntary organizations aiding war victims, repatriates and migrants were able to act relatively freely. Between 1948 and 1989 Poland was under Communism, a period very unfavorable to voluntary organizations, most of which were forbidden (Lés, Nalecz and Wygnanski, 2000, 9). The role of the Roman Catholic Church, which was one of the few institutions not dependent on government financial support, increased in the 1980s in providing welfare work and relief aid. In the 1980s two trends emerged: the activities of several communist organizations declined, but independently organized civic initiatives increased. During this time, foundations were re-established as well. With the fall of Communism starting in 1992 the number of Polish foundations nearly doubled, while associations quadrupled. Only at the end of 1990s growth slowly began to decline (Lés, Nalecz and Wygnanski, 2000, 11-12). 171.48% 12.32% 189.12% 103.98% -6.58% 110.43% 153.69% Figure 3: Percentage change by NPO type, SK, 1999-2010. Based on data from Strečanský (2012/2013, 77).
  • 10. 8 2.2 Roles/main tasks 2.2.1 Austria There are several different definitions for the main tasks of NPOs. Explaining every single one of these is beyond the scope of this text. Kramer (1981), Kendall (2003), Salamon et al (2000a), and Frumkin (2002) identified three main functions in Neumayr, et al. (2007b, 5): the service, the expressive, and the advocacy function. Another one was determined by Kendall (2003) and Salamon et al (2000a) in (Neumayr et al., 2007b, 5): the community building function. I decided to stick to the identification made in Neumayr et al. (2007b, 5) with the three main functions of service delivery, advocacy, and community building. This definition seemed to be an adequate and precise summary of the main tasks in Austria.  Service delivery refers to the economic subsystem and describes the pricing and paying for outputs by beneficiaries or public or private organizations. This function is mostly represented in the health care, educational, and scholarly system (Neumayr et al., 2007b, 6-7).  Advocacy refers to the political subsystem. It stands for the contribution to political decision making and governance. It can have a very wide range from formal contribution to legislation, as well as from informal lobbying to PR campaigns. Direct advocacy relates to political campaigns and legislative activities (public advocacy) whereas indirect advocacy signifies workshops in schools (citizen’s advocacy) (Neumayr et al., 2007b, 7).  Community building can be in the form of giving more strength to groups. This is referred to as “bonding groups” (Neumayr et al., 2007b, 7). The other function is “bridging groups” (Neumayr et al., 2007b, 7) which involves unifying groups or integrating individuals into a bigger group and working against exclusion of individuals (Neumayr et al., 2007b, 7). According to Neumayr et al. (2007b, 11-12) the most important function measured in terms of judgment of managers in NPOs is the service function, followed by the community building function, with the advocacy function bringing up the rear. 75% of all labor is dedicated to the service, 19% to the community building, and 7% to the advocacy function, when the importance of these functions is measured in terms of working hours dedicated to each function (Neumayr et al., 2007b, 12).
  • 11. 9 2.2.2 Germany With regard to size and role of the third sector in Germany, the following results were found:  It is an important economic force The third sector in Germany is bigger than in other countries and members of society are very willing to volunteer in NPOs.  It is significant to the labor market Germany’s non-profit sector accounts for approximately 5% of total employment, excluding agriculture. Counting in voluntary labor, this percentage rises to 8%. Figure 4: Non-profit employment comparison, GER (Source: Priller and Zimmer, 2001, 18)  It provides a significant amount of welfare goods and fulfills an important integration function The non-profit sector provides for example hospital beds, or places in nursery homes and kindergartens. It is active in integrating citizens into the community and works towards community participation, integration and socialization in order to further develop democracy.  According to size it meets the international average, but the sector is smaller than in several European countries and the USA. The German third sector lies slightly above the average of the 22 countries participating in the Johns Hopkins Project (Priller and Zimmer, 2001, 15-20). The two biggest fields for NPOs in Germany are social services and health, with 38.8% and 30.6% employment, respectively. In total, 70% of employment and 62% of expenditures are attributed to these two areas. The reason for such high figures in these two fields is the effect of the principle of subsidiarity, meaning the state is obligated in these fields to work very close with NPOs and subsidize them. TRANSPORT PRINTING INDUSTRY CHEMISTRY PUBLIC SERVICES TEXTILE INDUSTRY NON-PROFIT SECTOR 4.90% 2.80% 1.90% 1.70% 1.30% 4.90%
  • 12. 10 In contrast, the areas of sports and recreation do not have such a close relationship to the state and are supported more by volunteers (Priller and Zimmer, 2001, 23-24). The sector of health and recreation is supported by the most voluntary workers (Zimmer and Priller, 2001, 38). Overall, future prospects look quite bright for the German non-profit sector. 56% of companies that were interviewed in the course of the Johns Hopkins Project expect it to grow and 22% expect it to stay the same (Priller and Zimmer, 2001, 42). 2.2.3 Czech Republic The main function in the Czech Republic are service delivery, advocacy and community building (Neumayr et al., 2007b, 6-7). According to Neumayr et al. (2007b, 11-12), the most important function in the Czech Republic is the service function (42%), followed by advocacy and community building. Measured in terms of working hours, the ranking can be portrayed as service function (56%), community building (33%) and advocacy (11%). Czech NPOs focus mainly on sports and recreation, and not so much on social services. Therefore advocacy and community building are more relevant. This has historical reasons as this function has been covered by the government in the previous regimes (Neumayr et al., 2007b, 15). Czech NPOs try to distance themselves from political parties (Hyánek and Pospíšil, 2007 in Neumayr et al., 2007b, 16). This has historical roots stemming from the Communist Era (Neumayr et al., 2007b, 16). Furthermore, citizen’s advocacy through media is virtually non-existent in the Czech Republic. Indirect methods of influence OTHER FIELDS INTERNATIONAL ACTIVITIES, CITIZEN… HOUSING AND EMPLOYMENT ECONOMIC- AND LABOUR SOCIETIES CULTURE AND RECREATION SOCIAL SERVICES HEALTH EDUCATION 1.10% 2.50% 6.10% 3.90% 5.40% 38.80% 30.60% 11.70% 9.00% 6.10% 4.40% 4.20% 19.70% 27.20% 21.80% 7.60% paid employees and volunteers only paid employees Figure 5: Paid employees and volunteers by field, GER, 1995 (Source: Priller and Zimmer, 2001, 27)
  • 13. 11 like workshops in schools or educational work are preferred (Neumayr et al., 2007b, 17-18). Referring to the two types of community building given by Neumayr et al. (2007b, 7), “bonding”, so bringing people together, is much more important in the Czech Republic than “bridging”. A reason for this could be that the majority of Czech NPOs are active in culture, recreation, sports and education, which is populated by membership organizations (Neumayr et al., 2007b, 19). After having been abolished by the Communist Regime, the third sector is not yet settled and in most NPOs there is not an emphasis on just one field (Neumayr et al., 2007b, 14). Since 1989 work has been done on building organizations, but the position of Czech NPOs is not yet taken for granted, therefore community building still remains high (Neumayr et al., 2007b, 19). Volunteerism is much less common than in Central countries because during Communism it was seen as loyalty to the regime. Nowadays NPOs are concentrating on educating volunteers (Brhlikova, 2004, 24-26). 2.2.4 Slovakia The Slovak non-profit sector is constantly growing, at the moment there are 40,000 registered NPOs (Strečanský, 2012/2013, 77). There are six main types of NPOs in Slovakia:  civic associations  foundations  non-investment funds  public benefit organizations (Vaceková and Svidroňová, 2013,11)  church-based organizations  Associations of Land and Home-Owners (Strečanský, 2012/2013, 76) The most common types are civic associations and foundations, both working towards a public benefit, especially for municipalities, schools, hospitals, and individuals (Strečanský, 2012/2013, 77-78). Slovak NPOs are mostly found in the sectors of sports and recreation, followed by hospitals, social care, cultural activities, and environmental protection (Strečanský, 2012/2013, 79). Strečanský (2012/2013, 79-80) identifies six main functions:  Watchdog: An important barrier against authoritarian tendencies.  Alternative public policy development: In the 1990s, think-tanks and policy institutions emerged. They covered specifically the areas of economic,
  • 14. 12 privatization, legal reform, public administration, and environment.  Advocacy: Promote either interests and/or rights of certain groups of citizens, or boost specific issues such as environmental protection, foster care, human rights, and antidiscrimination issues.  Innovation: Social innovations, i.e. Roma teaching assistants in schools, self- help groups for women recovering from breast cancer operations, alternative schools (Bútora-Bútorová- Strečanský 2012:30 in Strečanský 2012/2013, 80).  Service provision: Especially in social care for people with special needs, elderly, children, sick people, and in the educational sector.  Humanitarian and development: Both domestic and abroad, they promote social spirit by raising public awareness of local, regional, or global responsibility, and improving solidarity to those in need. Especially in the areas of social affairs and education, NPOs are perceived as competitors for for-profit organizations, since they may provide better and alternative services (Strečanský 2012/2013, 80). Approximately half the people working in the non-profit sector are volunteers (Vaceková and Svidroňová, 2013, 12). 2.2.5 Poland The main types of organizations of the Polish non-profit sector are:  associations and other social organizations  labor unions  foundations  professional, business and employer organizations  church-based institutions (Lés, Nalecz and Wygnanski, 2000, 12-13) The main activities of Polish NPOs nowadays are in the fields of social services, education, and sports and recreation (Lés, Nalecz and Wygnanski, 2000, 23). Other activities include work to support the development of local communities, science, education, coaching, and upbringing (Majdanska, 2011, 8) One type of non-profit organizations, the co-operation (called co-op) works mainly to solve the problem of unemployment for young people, women, disabled, ex- prisoners, alcoholics, former narcotic and drug addicts, and refugees (Chyra-Rolicz, 2008, 2). They help with reintegration into normal life, provide social and financial help, health-care services, training, education, and cultural services (Chyra-Rolicz, 2008, 3-5).
  • 15. 13 Several NPOs try to operate globally, as well. Globalization also led to new challenges: the weakness of global institutions, new pressure on increasing activities and responsibilities, new forms of global poverty and crises (Dománski, 2008, 247 in Fudalinski, 2014, 85). The biggest challenge is the relationship between civil society and the State. Increasing commercialization of social services over partnerships between public and non-profit providers can be observed in social welfare delivery. This commercialization also led to the erosion of the service function of Polish NPOs in recent years (Lés, Nalecz and Wygnanski, 2000, 21-22). 2.3 Management Due to financial uncertainties NPOs are currently facing, they tried to find solutions to financial challenges by assessing management methods of regular enterprises and commercial corporations (Anheier, 2000b, 4). NPOs are improving the accountability and reporting of their financial situation, are increasingly looking at tax requirements, and improved their methods of fund raising (Anheier, 2000b, 5). Commercial companies have only one goal: maximizing shareholder wealth by maximizing profits. This does not hold true for NPOs which have several goals (Anheier, 2000b, 6). They operate in areas such as social services for the disabled, socially excluded or minorities, as well as hospices, or humanitarian organizations. Therefore, NPOs are actually much harder to manage and/or to find a managing strategy for, than commercial companies (Anheier, 2000b, 7). The “key to non-profit management” (Anheier, 2000b, 9) is to regard these organizations as a system incorporating different parts with various tasks. Only then is it possible to assess dimensions in these companies as choices conducted or not conducted by their managers or by another regulatory body (Anheier, 2000b, 9). In addition, there is not only one suitable approach towards centralization/ decentralization for each and every part of an NPO. The most efficient approach varies from department to department. For example: controlling and fund raising are most efficient when centralized, whereas efficiency in various other departments of the organizational task environment is the same, no matter if centralized or decentralized (Anheier, 2000b, 9).
  • 16. 14 2.4 Financial management At first glance financial management of regular companies and NPOs appears to be the same. However, especially considering the net working capital requirements, and the elements influencing it such as cash tied up in accounts receivable, inventories, the early settlement of accounts payable and operational cash balances, there is a significant difference (Michalski, 2012b, 83). There are three policies to manage accounts receivable:  restrictive policy (small levels of accounts receivable in relation to expected revenues, smaller operational costs, higher level of operational risk  higher cost of capital)  flexible policy (large levels of accounts receivable in relation to expected revenues, smallest level of operational risk and smallest level of cash flow under risk  lower cost of capital) moderate policy (in between restrictive and flexible policy) (Michalski, 2012b, 91). According to Michalski (2010) and Kim (1998) in Michalski (2012, 136), it is important for NPOs to keep money resource in reserve. The reasons are as follows:  necessity of current expenses financing (transactional reason)  fear of future cash flow uncertainty (precautional reason)  future interest rate level uncertainty (speculative reason) A higher risk implies a higher cost of financing (due to higher cost of capital) (Michalski, 2012, 136).This is also linked with the level of efficiency and effectiveness of realizing the NPO mission (Michalski and Mercik, 2011, 1). There are three strategies for financing:  aggressive strategy (most risk but cheapest, mainly short-term financing)  compromise strategy (compromise between risk and costs of financing)  conservative strategy (most expensive long-term financing, least risk) (Michalski, 2012, 137) The influence of the asset strategy on the cost of capital depends on the kind of risk taken by NPOs, the financial risk from leverage, and the individual risk of the NPO (Michalski and Mercik, 2011, 2). Some NPOs choose even higher risk and more aggressive liquid assets solutions than regular companies. It is advised that NPOs should first choose their liquid assets investment level and as a result of that the liquid asset financing method. (Michalski and Mercik, 2011, 11- 12).
  • 17. 15 According to Foster, Kim and Christiansen (2009), there are ten funding models for NPOs:  Heartfelt Connector: focuses on causes that concern large numbers of people at all income levels. Mostly found in the environmental, international, and medical research areas.  Beneficiary Builder: some NPOs are reimbursed for their services but also rely on people who have benefited from their service in the past and with whom they build a long-term relationship to receive not only regular fees, but also donations. This model is most common in hospitals and universities.  Member Motivator: relies on individual donations because the issue is important for everyday life and is collectively beneficial. The major difference to the previous model is that the Member Motivator offers or supports activities that individuals already seek. This model is mainly found in the fields of religion, environment, arts, culture, and humanities.  Big Bettor: receives major grants from a few individuals or foundations in order to finance their operations, especially for new and promising approaches to solve known problems. This model quite commonly found in medical research or environmental issues and problem solving.  Public Provider: represents the classical model of public funding. NPOs work together with government agencies to provide important social services, such as housing, human services and education. Historically these areas were basically funded by the government. Nowadays NPOs also look for alternative funding sources to expand.  Policy Innovator: developed novel methods to address various issues not yet covered by any other sources. They seek government funding to support their mission.  Beneficiary Broker: competes with others to provide government-funded or - backed services to beneficiaries. The main areas are housing, employment services, health care, and student loans. In this model, beneficiaries can choose from which NPO they will get the service.  Resource Recycler: their main goal is to collect in-kind donations from corporation and individuals in order to distribute them to recipients in need. These goods would otherwise go to waste and/or have minimal marginal cost and will not be distributed in markets that compete with the producer. These in-kind donations account for the majority of revenue and these NPOs are usually involved in food, agriculture, medical, and nutrition programs. Most of them are focused internationally.  Market Maker: provides a service that motivates self-less donors. They generate revenue from fees or donations directly linked to their activities. The main fields they operate in are health (organ donation), and environmental protection.  Local Nationalizer: create a network of locally based operations, focusing on issues such as poor schools or children in need. Most of the money is raised locally, from individual or corporate donations or special events. Only a marginal part is received from governmental sources.
  • 18. 16 3) Financing 3.1 Current sources 3.1.1 Austria According to Neumayr et al. (2007b, 22) approximately half of the income (46.6%) of Austrian NPOs stems from public sources. This corresponds to the model of public provider, where NPOs work together with government agencies to deliver mainly social services. The main division of sources of funding is between equity and borrowed capital (Vaceková and Svidroňová, 2013, 14). Schober et al. (2010) in Vaceková and Svidroňová (2013, 15) use the term “quasi-equity” to make up for the fact that NPOs do not have any equity in the economical sense of the word. Equity-like features are made up by donors, providers of subsidies, and members (Vaceková and Svidroňová, 2013, 14-15). This “quasi-equity” can further be separated into non-profit income (comes from funders and is related to the mission/goals of NPOs) and standard commercial income (income from investing activities or effect of yield of capital, not related to the mission of NPOs). Borrowed capital can be separated into common bank loans and other subsidized borrowed capital (i.e. loans that are designed specifically for NPOs and issued by the government) (Vaceková and Svidroňová, 2013, 15). According to Neumayr et al. (2007a, 6), the Austrian non-profit sector finances itself at 50% through the public sector. It gets 37% of its total revenues from earned income and 13% from philanthropy. The latter represents income from sponsors, donors, and support from households, organizations, and other NPOs. Concerning public funding, the most common sources are grants issued by the government and so-called performance related contracts. For a long time, government grants were used far more often than performance related contracts. However, this fact has begun to change in recent years (Neumayr et al., 2007a, 6-7). Earned income most commonly consists of service fees, sales, and membership fees. Membership fees occur mostly in the fields of environment, unions, and professional associations. The least important funding method in Austria seems to be income from donations and sponsoring (Neumayr et al., 2007a, 7-8). 3.1.2 Germany Germany’s third sector is financed through three main groups: public sources, (membership) fees, and donations. The main source of income is subsidies from the public sector; donations and fees are much lower. Same as in Austria, the most common model is the one known as Public Provider. In comparison to the average of
  • 19. 17 Central European countries, donations and fees are below average in Germany (Priller and Zimmer, 2001, 28-29). The existing “partnership” between the State and the NPOs allows German NPOs to escape the dependency on the market, an aspect with which other countries are struggling (Priller and Zimmer, 2001, 30). Figure 6: Financing, GER (Source: Priller and Zimmer, 2001, 30) There are significant differences in how the respective fields of the German third sector are financed. For example, the areas of health, education, social services, representation of citizens, and consumer interest and international activities are mainly financed by the State. On the contrary, income from fees dominates in environmental protection, culture and recreation and art and culture. Professional associations and unions are financed almost entirely through membership fees and foundations are mainly financed through capital investments and similar sources (Priller and Zimmer, 2001, 32). However, a decrease in the amount of public funding has been observed, especially considering the financial value of voluntary work. In addition, changes in regulations and in the increasing sensitivity of the public play an important role in the amount of public funding. Differences in the financial situation between West- and East- Germany were noticed. More East- than West-German NPOs had and some still have financial trouble due to reduction in public funding, high labor costs, reduction in equity capital or changes in selection criteria of national and federal funding (Priller and Zimmer, 2001, 40-41). The privileged position of half of the non-profit sector through the principle of subsidiarity, stands in contrast to the rules of the European Union, which states equal chances for everyone. Therefore it seems very unlikely, that the health and social services sector, which are subsidized the most, will be able to keep their market share with the new regulations. Also on a national level there have been legal reforms with PUBLIC SOURCES DONATIONS FEES 64.30% 3.40% 32.30% 55.60% 7.20% 37.20% Germany Western Europe
  • 20. 18 regard to tax deductibility and tax treatment. In the future, the German non-profit sector will most likely trade in its dependency on the State for a stronger market- based orientation (Priller and Zimmer, 2001, 43). 3.1.3 Czech Republic In the Czech Republic, approximately one third (33.5%) of the income is derived from public sources (Neumayr et al, 2007b, 22). Most of the income of NPOs is derived from revenues from their own activities by the means of fees and charges. This appears to correspond best to the Beneficiary Builder model, where NPOs derive the majority of their income from fees and donations collected from previously serviced individuals. Another source is philanthropy (Brhlikova, 2004, 26). This appears to correspond better to the Member Motivator model, being funded by donations from individuals for causes integral to everyday life. Salamon et al. (1999, 25) describes the Czech non-profit sector as “fee dominant”. The amount stemming from philanthropy is slightly higher compared to Central countries (Brhlikova, 2004, 26). Figure 7: Financing, CR (1999). Based on data from Brhlikova, 2004, 26. There is a major problem with people’s contributions to NPOs, because most citizens believe that paying taxes is more than enough (Brhlikova, 2004, 28). Fric (2000) in Brhlikova (2004, 28) marks two important years, in which donations for Czech NPOs rose: 1997 and 2002, due to heavy floods in several regions in the Czech Republic. Companies prefer sponsoring to donating, because sponsoring is deductible from taxable income (Potucek et al., 2001 in Brhlikova, 2004, 29). Czech NPOs were strongly affected by the financial crisis of 2008. This was evident through changes in the amount and structure of private philanthropy, and the public financing support. The Czech government cut public expenditure especially in own activities 47% public sources 39% philantropy 14%
  • 21. 19 the fields of social and health care, which is unfortunate because many NPOs are active in those fields. This influenced both financial and non-financial aspects and strategies of NPOs (Prouzová, n.d., 1) To ensure support from the public, as well as from individuals, Czech NPOs should increase their degree of transparency by providing information about projects, sources of income, costs of fundraising, property, and board members (Brhlikova, 2004, 30-31). 3.1.4 Slovakia Slovak NPOs do not have the luxury of public support and have to rely more on financing themselves. Private funding or donations in the form of grants and/or membership fees, is more frequently used as a source of funding (Vaceková and Svidroňová, 2013, 16). This is a clear indicator for the Beneficiary Builder. Contributions and donations from the private sector have increased in recent years (Strečanský, 2012/2013, 80). Public funding can be classified as follows:  Subsidies from budgetary chapters of different ministries and government agencies  Subsidies from the levy on the gaming industry  Structural funds of the EU  Bilateral aid (Norwegian, Swiss financial mechanisms)  2% tax assignation The most significant source of public funding is subsidies. The 2% (now reduced to 1.5% (Strečanský, 2012/2013, 92)) tax assignation also represents a very important source of income for NPOs. Basically, this is currently a 1.5 percentage point reduction on income tax NPOs are paying. The major advantage of this tax assignation is that it can be used for general purposes and is not project bound (Strečanský, 2012/2013, 81-82). The relationship between NPOs and the State is very complicated in Slovakia. It took a long time until NPOs got recognized by the government, a quite frustrating experience for them (Strečanský, 2012/2013, 85-86). The most recent financial crisis severely impacted the relationship between NPOs and the State. One key factor for NPOs to assure survival is proper communication with private and public sources and counterparts, as well as keeping the general public informed (Strečanský, 2012/2013, 88).
  • 22. 20 3.1.5 Poland Unfortunately, no detailed information on percentage of different funding types could be found for Poland. Polish NPOs are supported by public sources and EU funds only to a certain extent (Chyra-Rolicz, 2008, 3). In 1999, the decentralization reform along with changes in public financing regulations led to a suspension of most of the public support. This created the opportunity for future partnerships between local authorities and NPOs (Lés, Nalecz and Wygnanski, 2000, 22). The income of NPOs is tax exempt, so are most of their activities and expenditures (Majdanska, 2011, 14) Polish NPOs have a shorter operating cycle, less accounts receivable days and a smaller inventory period than most companies in Poland (Michalski and Mercik, 2011, 8-9). During the post-communist (transition) period Poland got significant support from international governmental and non-governmental agencies, which portrayed an important source of their income (Lés, Nalecz and Wygnanski, 2000, 20). Nowadays however, it is almost impossible to get foreign sponsors, partly due to the lack of experience of Polish NPOs (Fudalinski, 2013 in Fudalinski, 2014, 88). In 1999, only 8% of countries contracted social services out to Polish NPOs, while 12% offered grants (Lés, Nalecz and Wygnanski, 2000, 22). A good relationship with the State is crucial for NPOs in Poland, especially due to the significant reduction in international financial support, as well as the inefficiency of private domestic funding (Lés, Nalecz and Wygnanski, 2000, 21). 3.2 Cross-country comparison One of the best sources for cross-country comparison is the Johns Hopkins Comparative Nonprofit Sector Project. In the course of this project, the third sector in selected countries was assessed based on its economic structure, as well as historical, social, and political dimensions (Zimmer and Priller, 2001, 17). Following is an overview of the participating countries: Central Europe Central- and Eastern Europe Netherlands Germany Czech Republic Ireland Spain Slovakia Belgium Austria Hungary France Finland Romania
  • 23. 21 Great Britain other industrial countries Latin America Australia Argentina United States Brazil Japan Colombia Israel Mexico Peru Figure 8: Overview of countries (Source: Zimmer and Priller, 2001, 18) The non-profit sector has several defining criteria:  organizational structure  structural independence from the government  self-government  non-distribution constraint  volunteerism/non-compulsory  public benefit and political non-involvement (Lés, Nalecz and Wygnanski, 2000, 17-18) The third sector in Europe goes back to the Medieval Ages and had a big tradition in the time of reformation, the Napoleon Era and the time of industrialization and urbanization. The third sector is largest in countries with a close cooperation between NPOs and the State (Zimmer and Priller, 2001, 25). The main focus or reason of existence varies by country or specific region (Zimmer and Priller, 2001, 26).: Dominant field with regards to employment countries Education and research Argentina, Brazil, Mexico, Peru, Belgium, Ireland, Great Britain, Israel Health USA, Netherlands, Japan Social services Austria, France, Germany, Spain Culture and recreation Czech Republic, Slovakia, Hungary, Romania no dominance Colombia, Finland, Australia Figure 9: Dominant fields with respect to countries (Source: Zimmer and Priller, 2001, 26) That social services dominate in Central European countries like Austria and Germany can best be explained by the influence of the Roman Catholic Church and its principle of subsidiarity. Contrary, a reason for the focus on culture and recreation in Eastern European countries could be the low establishment of NPOs in these countries as a result of the Communist Regime (Zimmer and Priller, 2001, 26-27).
  • 24. 22 Concerning financing, there are three main sources of income for NPOs:  public sector  fees  philanthropy (donations) (Zimmer and Priller, 2001, 27) The survey of the 22 countries brought the following results: Figure 10: Financing of NPOs in 22 countries, 1995 (Source: Salamon et al., 1999, 24) Financing through fees as well as income through own activities is particularly well established in Latin America, Central- and Eastern Europe and in Australia, Japan and the USA, corresponding to the Beneficiary Builder model. In Central Europe and Israel the main source of income stems from the state, meaning subsidies and grants (Zimmer and Priller, 2001, 27-28). This constitutes the Public Provider model. For comparative reasons, an extract of the income statement of an American non-profit food shelter (Food for Others) that provides food and donated items for underprivileged and/or homeless. Figure 11: Food for Others revenues 2013, % of total revenues. Based on data from Audited Financial Statements 2013, 6. Public sector 40% fees and charges 49% philantrop y 11% 78.44% 17.20% 3.33% Donated goods, services, utilities and facilities Contributions Government contracts for services
  • 25. 23 The majority of income is derived from in-kind donations from corporations and individuals – a clear indicator of the Resource Recycler funding model. The non-profit sector in general is a major economic force and accounts for a significant share of employment (Salamon et al., 1999, 8). To get an idea of how dominant the sector really is, the assumption was made that the third sector in the Johns Hopkin’s countries is a country of its own. The following tables provide an overview of the worldwide ranking under these assumptions. Country GDP (trillion $) USA $7.20 Japan $5.10 China $2.80 Germany $2.20 France $1.50 UK $1.10 Nonprofit Expenditures (22 countries) $1.10 Brazil $0.70 Russia $0.70 Spain $0.60 Canada $0.50 Figure 12: If NPOs were a country, GDP (Source: Salamon et al., 1999, 9) Employment and voluntary work differs quite significantly among various countries participating in the Johns Hopkins Project. Figure 13: Employment and voluntary work, 22 countries (Source: Salamon et al., 1999, 13) WESTERN EUROPE OTHER DEVELOPED LATIN AMERICA CENTRAL EUROPE 7.00% 6.90% 2.20% 1.10% 10.30% 9.40% 3.00% 1.70% Paid employees Volunteers
  • 26. 24 The conclusion can be drawn that the third sector, though not very well known and in some countries not yet that well established, is not to be underestimated with regards to economic power. 3.3 Alternative sources Unfortunately, NPOs in general are commonly known for spending a significant amount of money on administration (Mahapatra, 2013). Many people feel that the majority of money donated to such institutions has no chance to reach the people in need (Altucher, n.d.). NPOs are definitely challenged to convince donors by using more direct means of help and proving this to their customers by the means of proper reports (Zimmerman, Lehman, 2009). Food for others, the U.S. organization described earlier, is based on the idea to keep administration costs to a minimum. It relies more on companies donating food and materials they would not be able to sell any more (Food for Others, Audited Financial Statements 2013, 6). Companies are quite willing to engage in such efforts, especially for a good cause. The organization is also very close to the people in need and stays local. Interestingly enough, similar things started to happen in Austria, as well. One just needs to watch the news recently. There are supermarket chains (Caritas, 2013), banks, or even radio stations who trigger new ideas like getting donations to buy desks for students in need to give them proper working tools for school (Herok, n.d.). There were hardly any administrative costs to the donors, the majority of money or hardware donations went right to the people in need. In addition there was a tremendous amount of information to the public. In short: Direct help to the ones in need, hardly any administrative costs. Are these alternatives competing with NPOs and/or just showing what they ought to be doing? If NPOs want to survive, they will have to change for the better. Their major task will be to find meaningful projects, especially local projects and advertise them properly. People are far more willing to donate for causes happening in the vicinity than somewhere far away (Fritz, n.d.). Activities like this correspond to the Local Nationalizer model. In addition, any donor has one major interest: To make sure that the donation is getting to the person and/or area in need and not “eaten” by administrative costs (Altucher, n.d.). Websites like Charity Navigator rate NPOs on how much of their donations they spend on their actual projects. Globally, some of the most efficient ones were: American Red Cross, World Vision, Doctors Without Borders, and the American Cancer Society (Delp, n.d.). Alternatively, NPOs can and should create projects managed by their own staff, similar to the most recent desk-for-students quest initiated by a radio station (Herok, n.d.). People not only donated money, but producers of desks (basically large furniture manufacturing companies) saw this as a perfect opportunity for advertisement and using some of their old stock - rather than having to write it off.
  • 27. 25 One furniture company even offered 200 desks for this project free of charge. Basically, this is a much cheaper and more direct means of advertising and helping people in need at the same time. Showing this type of social competence may prove as an additional motivator for people to buy products from that company (Herok, n.d.) Overall this represents a perfect win/win situation. One method of financing would be to tap into the resources that supermarkets and/or banks already have. In order to succeed, NPOs will have to market their ideas and provide details about their projects. However, it may turn out that banks and supermarkets are more of a competitor in the field of helping others (Caritas, 2013). If NPOs manage to become a different type of advertising agency, they will definitely have a much better chance to finance themselves and to help the people in need. In addition, such efforts would also demonstrate social competence and improve help and respect, not only in the neighborhood, but even internationally. The most costly part of any company are usually salary cost. Another step for NPOs would be to create projects and advertise for voluntary help. However, in order to do so and to earn the trust of the donors and helpers, they need to improve their public standing and provide clear proof of project costs and success. This information needs to be made available to the public over the Internet and prove the fact that less than 33.3% (Delp, n.d.) are used for administering the project by staff paid by the NPO (Zimmerman, Lehman, 2009). This type of project reporting and reduction of administrative costs might also improve the willingness of government and the population to donate money for a good cause (Zimmerman, Lehman, 2009). One alternative becoming increasingly popular is the usage of Internet, especially social media, which makes it easier to reach the required audience and donors all over the world (Blackwell, 2013). The main ways are to pin and post the required items on Pinterest or Facebook, give updates via Twitter on recent news, or list examples on how people’s donations made significant differences. NPOs can also create social media campaigns on Facebook, Twitter, or similar networks around Thanksgiving and New Year. This is the time where people are most willing to donate and companies have set their budgets for the next year. According to the CEO of Animal Shelter Fundraising, U.S. NPOs receive 41% of their annual contributions between Thanksgiving and New Year (Blackwell, 2013). Another alternative would be to hold contests on Facebook throughout the year, like naming a lion cub. Last but not least NPOs should take advantage of crowdfunding. This is an online fundraising event using an app such as FundRazr that can be shared via Facebook, Twitter, email, blogs and websites. These strategies are easy and if planned correctly can be very effective as fundraising tools. Their most important advantage is the sheer endless capacity of outreach (Blackwell, 2013). It almost looks like NPOs are under severe pressure to change their behavior, otherwise “their” tasks will be taken over by others, like banks, supermarket chains, TV or radio stations.
  • 28. 26 4) Summary of Findings and Conclusion “How can NPOs finance themselves and which methods are most commonly used?” Financing of NPOs relies on three main sources of income:  public funding  donations  income from fees and charges The first source dominates in Central Europe, the last one in Eastern Europe. Country main funding method main funding model Austria Public funding Public Provider Germany Public funding Public Provider Czech Republic fees and charges Beneficiary Builder Slovakia donations and fees Beneficiary Builder Poland not specified not specified Figure 14: main funding method and model per country NPOs struggle with different problems. In post-communist countries a main problem is that NPOs are not yet well established, and that they do not have a very good relationship to the State. The lack of voluntary contribution by citizens and finding sources of funding represent two other problems. Due to the economic crisis, public funding has significantly decreased, which poses a major problem especially for Central European NPOs who depend mostly on public funding. These NPOs will need to restructure themselves and find alternative funding methods. Most of the organizations suffer from the public opinion that a significant amount of money is spent on administering themselves and only a marginal amount ever makes it to the people in need. NPOs need to focus on two major issues: Improving their reputation and closer focus on the people in need. Both of these issues can only be solved by a change in how they handle themselves and their projects. Basically, cost reduction and focus on local issues appear to be the means for a more successful future. In addition, clear communication of projects and publication of financial statements on the Internet is essential. If one expects people to donate their money, they have a right to know what it was spent on. Lack of transparency sends the signal of having something to hide. One option would be to increasingly use social media to advertise their projects and required items, and convey information and create campaigns over Twitter or Facebook. A recently very popular method are online fundraising events like crowdfunding, using an app called FundRazr that can be shared all over the Internet.
  • 29. 27 Another option would be to work together with banks and supermarkets to advertise their projects, and also to cooperate with manufacturers, who provide their products at reduced costs in turn for being promoted. This also draws attention to their social competence, which can be the difference between failure and success. This scenario demonstrates a perfect “win/win” situation for everybody involved. In addition, actions like this will assure something else: Respect and helping each other is more important than badmouthing or challenging each other, under the motto: Together we are stronger and can achieve anything.
  • 30. 28 5) Table of abbreviations NPO ……………………………………………………………Non-profit organization CEE …………………………………………………………..Central- and Eastern Europe SPÖ …………………………………………………………..Social-Democratic Party ÖVP …………………………………………………………..Austrian People’s Party GDP ………………………………………………………….Gross Domestic Product
  • 31. 29 6) Table of Figures Figure 1: Classification of organizations (Source: Majdanska, 2011, 5) ...................... Figure 2: Growth of the Czech non-profit sector, 1991-1998. Based on data from Brhlikova, 2004, 23............................................................................................6 Figure 3: Percentage change by NPO type, SK, 1999-2010. Based on data from Strečanský (2012/2013, 77). ............................................................................... Figure 4: Non-profit employment comparison, GER (Source: Priller and Zimmer, 2001, 18) ..................................................................................................................9 Figure 5: Paid employees and volunteers by field, GER, 1995 (Source: Priller and Zimmer, 2001, 27) ............................................................................................. Figure 6: Financing, GER (Source: Priller and Zimmer, 2001, 30) ..........................17 Figure 7: Financing, CR (1999). Based on data from Brhlikova, 2004, 26................18 Figure 8: Overview of countries (Source: Zimmer and Priller, 2001, 18) .................21 Figure 9: Dominant fields with respect to countries (Source: Zimmer and Priller, 2001, 26) ................................................................................................................21 Figure 10: Financing of NPOs in 22 countries, 1995 (Source: Salamon et al., 1999, 24) ................................................................................................................22 Figure 11: Food for Others revenues 2013, % of total revenues. Based on data from Audited Financial Statements 2013, 6.................................................................22 Figure 12: If NPOs were a country, GDP (Source: Salamon et al., 1999, 9).............23 Figure 13: Employment and voluntary work, 22 countries (Source: Salamon et al., 1999, 13) .......................................................................................................23 Figure 14: main funding method and model per country .......................................26
  • 32. 30 7) Bibliography Altucher, James. n.d. 10 Reasons Why I would Never Donate to a Major Charity (or, How to be a Superhero, Part 2). Anheier, Helmut K. 02/2002a. The third sector in Europe: Five theses. Civil Society Working Paper 12, Centre for Civil Society, LSE, London, UK. Anheier, Helmut K. 2000b. Managing non-profit organisations: Towards a new approach, Centre for Civil Society, LSE, London, UK. Blackwell, Amandah. 2013. Social Media for Nonprofits: 5 Ways to Increase Donations for Nonprofits. Orbit Media Studios. Brhlikova, Petra. 2004. The Nonprofit Sector in the Czech Republic, Czech Republic. Caritas. 2013. "Aufrunden, bitte.". Austria. Chyra-Rolicz, Zofia. 2008. Experiences of Social Economy in Poland - Ideas and Practices, University of Podlasie, Poland. Food for Others, Board of Directors, and Carter & Boyce Matthews. 2013. Audited Financial Statements 2013. Fairfax, Virginia: Food for Others. Foster, William, Kim, Peter, Christiansen, Barbara. 2009. Ten Nonprofit Funding Models. Stanford Social Innovation Review. Fritz, Joanne. 2014. Why People Don't Give to Our Causes - What We Can Do about money n.d. [cited 17.11. 2014]. Gale Group, Inc. 2014. West's Encyclopedia of American Law 2008 [cited 15.8. 2014]. Herok. n.d. bene stiftet 200 Schreibtische für Hilfsaktion von Ö3 und Volkshilfe. Les, Ewa, Slawomir Nalecz, and Jakub Wygnanski. 2000. Defining the Nonprofit Sector: Poland, Center for Civil Society, Johns Hopkins University, Baltimore. Mahapatra, Lisa. 2013. Worst Charities: The "Non-Profits" That Spend Most Of Their Money on Fundraising. International Business Times. Majdanska, Alicja. 2011. Taxation of non-profit organizations - Poland, University of Warsaw, Poland. Michalski, Grzegorz. 2012. Optimalization of Liquidity Strategy: Polish Nonprofit Organizations Case, Wroclaw University of Economics, Poland. Michalski, Grzegorz. 2012b. "Accounts receivable management in nonprofit organizations." Central and Eastern European Online Library (68):83-96. Michalski, Grzegorz, and Aleksander Mercik. 2011. Liquid Assets Strategies in Silesian Non-Profit Organizations finance department - faculty of economics, VŠB-TU Ostrava, Ostrava. Neumayr, Michaela, Meyer, Michael, Pospíšil, Miroslav, Schneider, Ulrike, Malý, Ivan. The Role of Civil Society Organisations in Different Nonprofit-Regimes: Evidence from Austria and the Czech Republic. Vienna University of Economics and Business, Masaryk University 2007b [cited 8.8.14. Neumayr, Michaela, Schneider, Ulrike, Meier, Michael, Haider, Astrid. 01/2007a. The Non- profit Sector in Austria - An economic, legal and political appraisal, Institut für Sozialpolitik, WU Vienna University of Economics and Business, Vienna. Priller, Eckhard, and Anette Zimmer. 2001. Der Dritte Sektor: Wachstum und Wandel, Johns Hopkins University, Germany. Salamon, Lester M., Helmut K. Anheier, Regina List, Stefan Toepler, and S. Wojciech Sokolowski. 1999. Global Civil Society - Dinemsions of the Nonprofit Sector, Center for Civil Society Studies (Institute for Policy Studies), Johns Hopkins University, Baltimore, MD. Salamon, Lester M., Anheier, Helmut K. 1997. Defining the non profit sector - A cross national analysis, Manchester University Press, Manchester, New York. Salamon, Lester M., Anheier, Helmut K., Sokolowski, S. Wojciech
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