var textForPages = ["","","Instytut Naukowo-Wydawniczy „Spatium”                                       Masarykova univerzita                                                                                     Gabriela Vaceková                                                         Mária Murray Svidroňová                   Nonprofit organizations in selected CEE countries:                                                  A journey to sustainability                                                                       Radom–Brno 2016","Reviewers:             Assoc. Prof. Wojciech Sońta, Ph.D. – University of Technology and Humanities in Radom, Poland             PD Dr. Vladislav Valentinov – Leibniz Institute of Agricultural Development,                                                          in Transition Economies (IAMO) in Halle (Saale), Germany                 Cover Design: Marzena Tyl             Proofreading: Anne Johnson             Technical editing and DTP: Małgorzata Dyr             Photo credit: Jürgen Angel, WU               Authors:             Ing. Gabriela Vaceková, PhD. – Department of Public Economics, Faculty of Economics                                        and Administration, Masaryk University.                                        Chapters: 1, 2, 4.3.1, 4.3.3, 4.4, 5.1             Ing. Mária Murray Svidroňová, PhD. – Department of Public Economy and Regional                                              Development, Faculty of Economics,                                              Matej Bel University.                                              Chapters: 3, 4.1, 4.2, 4.3.2, 5.2                  © Copyright by Masarykova univerzita, Brno 2016             © Copyright by Instytut Naukowo-Wydawniczy „Spatium”, Radom 2016                ISBN 978-80-210-9635-6 (Masarykova univerzita, Brno)               ISBN 978-83-62805-03-7 (Instytut Naukowo-Wydawniczy „Spatium”, Radom) (print)             ISBN 978-80-210-8188-8 (Masarykova univerzita, Brno) (print)             DOI: 10.5817/CZ.MUNI.M210-8188-2016               Publishing House:             Instytut Naukowo-Wydawniczy „Spatium”            Masarykova univerzita             26-600 Radom, ul. 25 Czerwca 68                  Žerotínovo nám. 9             tel./fax 48 369 80 74,                           601 77 Brno             e-mail: wydawnictwo@inw-spatium.pl               Česká republika             http://www.inw-spatium.pl                     Edition: Economics and Management","Acknowledgement               The authors would like to express their deepest gratitude to their families.                              Thank you for all your loving patience and kind support,                                                           this work is also truly yours!","","Contents                  List of abbreviations   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .7              Introduction  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .9              Chapter 1             Theoretical and conceptual foundations    .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   11             1.1.  Nonprofit sector  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .    11                 1.1.1. Nonprofit organizations and their position in the national economy    .   .   .    11                 1.1.2. Theories of the nonprofit sector    .    .    .    .    .    .    .    .    .    .    .    .    .    .    .   15             1.2.  Social economy    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    19                 1.2.1. Concept of the social economy   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   20                 1.2.2. Social entrepreneurship and social enterprises    .   .   .   .   .   .   .   .   .   .   .   .    25             Chapter 2             History of the nonprofit sector and social economy  .  .  .  .  .  .  .  .  .  . 29              2.1.  Development of the nonprofit sector in the Czech Republic  .  .  .  .  .  .  .  . 29             2.2.  Development of the nonprofit sector in Slovakia    .  .  .  .  .  .  .  .  .  .  .  .  .  . 31             2.3.  Development of the nonprofit sector in Austria  . . . . . . . . . . . . . . . 33             2.4.  History of social entrepreneurship in Europe   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 34              Chapter 3             Importance and justification of private nonprofit organizations    .  . 39             3.1.  Empirical testing of theories of the nonprofit sector in Slovakia  .  .  .  .  .  . 39             3.2.  Functions of private nonprofit organizations in society  . . . . . . . . . . . 49             3.3.  Evidence on private nonprofit organizations in the Czech Republic,                  Slovakia and Austria    .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 55","6                            Nonprofit organizations in selected CEE countries ...              Chapter 4             Current state of funding of nonprofit organizations    .  .  .  .  .  .  .  .  . 61              4.1.  Funding sources of nonprofit organizations   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .    61             4.2.  Self-financing of nonprofit organizations  . . . . . . . . . . . . . . . . . .   63                 4.2.1. Nonprofit self-financing in the Czech Republic, Slovakia, and Austria .   .   .   64                 4.2.2. Benefits and risks of self-financing    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    70             4.3.  Commercialization of nonprofit organizations . . . . . . . . . . . . . . .   73                 4.3.1. Data on nonprofit commercialization in the Czech Republic .   .   .   .   .   .   .   77                 4.3.2. Data on nonprofit commercialization in Slovakia  .   .   .   .   .   .   .   .   .   .   .    81                 4.3.3. Potentials of nonprofit commercialization   .   .   .   .   .   .   .   .   .   .   .   .   .   .    84             4.4.  Financial controlling in nonprofit organizations . . . . . . . . . . . . . .   85                 4.4.1. Utilization of financial controlling in Slovak nonprofit organizations   .   .   .    86             Chapter 5             Social innovations as future trend in nonprofit sector research   .  .  . 99             5.1.  Social entrepreneurship in the Czech Republic and Slovakia . . . . . . . . 99             5.2.  Innovations in the context of social economy                  and nonprofit organizations   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 110                 5.2.1. Social innovations in public services in Slovakia .   .   .   .   .   .   .   .   .   .   .   .  114                 5.2.2. PrieStory Program .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  119                 5.2.3. Kojatice Social Housing  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  123              Summary    .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  129             References  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  131              List of figures   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  145              List of tables  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  147","List of abbreviations                 ANA     – Annual National Accounts              AT      – Austria              CA      – Civic associations              CEE     – Central and Eastern Europe              CIRIEC – International Center of Research and Information on the Public,                         Social, and Cooperative (Centre International de Recherches                         et d'Information sur l'Economie Publique, Sociale et Coopérative)              CSO     – Czech Statistical Office (Český statistický úřad)              CZ      – Czech Republic              CZK     – Czech Crown (Česká koruna)              EMES    – Emergence des Entreprises Sociales en Europe              ERDF    – ERDF - European Regional Development Fund              ESF     – European Social Fund              EU      – European Union              EUBA    – University of Economics in Bratislava                         (Ekonomická univerzita v Bratislave)              GDP     – gross domestic product              LIPSE   – Learning from Innovation in Public Sector Environments              Ltd.    – Limited              MPSV    – The Ministry of Labour and Social Affairs                         (Ministerstvo práce a sociálních věcí)              NF      – Noninvestment funds              NGO     – nongovernmental organization              NPO     – nonprofit organization              o.p.s.  – public benefit organization (obecně prospešná společnost)              OECD    – Organization for Economic Co-operation and Development              ÖVP     – Austrian People’s Party (Österreichische Volkspartei)              PBO     – Public benefit organizations","8                             Nonprofit organizations in selected CEE countries ...                SANI      – Satelit Account of Nonprofit Institutions              SČMVD     – Union of Czech and Moravian Production Co-operatives                           (Svaz českých a moravských výrobních družstev)              SE        – social economy              SK NACE – Slovak Nomenclature statistique des activités économiques dans                           la Communauté européenne (klasifikácia ekonomických činností)              SPSS      – Statistical Package for the Social Sciences              SVK       – Slovakia              TESSEA – Thematic network for social economy                           (Tematická síť pro sociální ekonomiku)              UMB       – Matej Bel University (Univerzita Mateja Bela)              US        – the United States              WISE      – Work Integration Social Enterprise              WU Wien – Wirtschaftsuniversität Wien                           (Vienna University of Economics and Business)","INTRODUCTION                     Nonprofit organizations play an important and irreplaceable role in building             a civil society. They are one of the main pillars of democracy and bearers of its             principles, which can be used to argue the merits of their own existence and the             intensive research of their field both on a theoretical and practical level.                Based on an interdisciplinary methodological approach, this scientific mon-             ograph shows the role and position of nonprofit organizations in the national             economy in selected Central and Eastern European countries. The data used were             collected in the course of the authors’ common research, which focuses on the             funding of nonprofit organizations, including self-financing and commercializa-             tion issues; financial controlling as a tool of nonprofit organizations’ financial             management; and nonprofit organizations as bearers of social innovations. Based             on the stage of research, we provide data analysis supporting the researched issues             in the Czech Republic, Slovakia, and Austria.                The text itself is divided into five main chapters: the theoretical and concep-             tual base of the nonprofit sector and the social economy, the history of nonprof-             its in selected CEE countries, the importance and justification of the nonprofit             sector, the current state of nonprofit organizations and their funding, and the             future of nonprofits in the social economy and social innovations. The subchap-             ters are logically connected and enable the presentation of the researched is-             sues in a wider context of interdisciplinary overlaps with other scientific fields.             Individual chapters contain relevant empirical data from the authors’ own re-             search, vividly illustrating the nonprofit sector in selected CEE countries and             its never-ending journey to sustainability, while earning its position, funding,             and independence.                Sustainability of nonprofit organizations is a key concern for today’s non-             profit scholars and practitioners. The sustainability of any organization means             its capacity to fulfill its mission in the most effective way. In other words, sus-             tainability ensures that an organization works continuously for as long as pos-             sible in the marketplace. The scientific monograph describes this journey to             sustainability, while examining the challenges and opportunities for nonprofit","10                            Nonprofit organizations in selected CEE countries ...                organizations in achieving a stable marketplace and a strong position in the             national economy.                The authors hope that this monograph provides a sufficient methodological             and theoretical basis for further research and creates a space for discussion in             areas beyond the range of the issues within the monograph. It may serve as an             inspiration for the theory and practice of nonprofit organizations internationally             and as a basis for further scientific activities.                                                                               Authors","ChapTeR 1                       Theoretical and conceptual foundations                   In the presented scientific monograph, we explore the journey to sustainability             of nonprofit organizations in selected CEE countries. We make efforts to pave this             journey with abundant empirical material that we have managed to collect and             evaluate during our long-time common research, and also with a solid theoreti-             cal framework upon which we build our assumptions and draw the conclusions.               1.1.  Nonprofit sector                 Recently, there has been a considerable surge of interest throughout the             world in the broad range of organizations that operate outside the market and             the state. Known variously as the „nonprofit”, „nongovernmental”, „voluntary”,             „civil society”, „third”, or „independent” sector, it involves numerous types of             entities, including hospitals, universities, social clubs, professional organiza-             tions, day care centers, environmental groups, sports clubs, job training cent-             ers, and human rights organizations (Salamon, Sokolowski \& Anheier, 2000).             For clarity, it is necessary to provide a brief insight into the main definitions of             the nonprofit sector and organizations operating within it. In the following part             we define the terms but if not specified by „nonprofit organizations” we mean             both governmental and nongovernmental nonprofit organizations, only when             we want to stress the private character of nonprofits, we use the term nongov-             ernmental organizations.              1.1.1. Nonprofit organizations and their position in the national economy                 To understand the principles based upon which nonprofit organizations exist,             it is important to define their position within the national economy, determin-             ing the limits within which these organizations carry out their activities and             fulfill their missions. In order to describe the organizations operating within the             third sector, nonprofit scholars use the term „private nonprofit organizations”","12                            Nonprofit organizations in selected CEE countries ...                as the most accurate for expressing the fact that these organizations result from             a three-sector economy. To explain the origin of the name it is the best to use             the following scheme:                                          Organizations                                 state                           private                          (government) nonprofit   profitable organizations   (nongovernment)                        organizations         (companies)      nonprofit organizations                       FIRST SECTOR         SECOND SECTOR         THIRD SECTOR              Figure 1. Scheme of three sectors of the national economy             Source: Svidroňová, Vaceková, 2012.                  Some authors have suggested that the nonprofit sector is by nature unsuited             to singular definitions (Chew \& Osborne, 2008). Pestoff (1992; 1998) modified             this perspective by situating the nonprofit sector at the center of the welfare             triangle (figure 2), clearly separated from the state, market, and community             (households) by major social divisions, i.e., public/private, for-profit/nonprofit,             and formal/informal.                The welfare triangle helps to define major governance institutions in society             and to depict the changes in the welfare mix in post-industrial societies. Along             with the market, state, and community, there is the nongovernmental nonprof-             it sector. It is comprised of voluntary organizations, civic associations, sports             clubs, social enterprises, popular movements, etc. (Pestoff, 1992).                One advantage of Pestoff’s classification is that the triangle image makes it             possible to read the basic characteristics of the organizations operating in the             individual areas. The diagram greatly contributes to the understanding of the             nonprofit sector position. The entire triangle represents a national economy. It             is divided into three areas, reflecting the following divisions:                • Formal/informal sector – the division reflects whether there is a legal entity.                Legal entities are regulated by acts, making them formal;","Chapter 1: Theoretical and conceptual foundations                      13                   • Public/private organizations – the division is a reflection of who founded,                owns, and operates the organization. Sometimes this division is problematic,                especially due to unclear legal regulations;                • Profit/nonprofit organizations – this division is a reflection of the purpose                for which the organization was founded. This is indicated by legal regulations                and the Income Tax Act.                                 Informal     Formal                                                     6WDWH                                                3XEOLF DJHQFLHV                                                                      Public                                                   7KLUG VHFWRU          Private                                                     9ROXQWDU\\                                              QRQSURILW                                                  RUJ                                   \&RPPXQLW\\               0DUNHW                                +RXVHKROGV  )DPLOLHV                          3ULYDWH ILUPV                                       Nonprofit    For-Profit               Figure 2. The welfare triangle             Source: Authors, based on Pestoff, 1992.                 The nonprofits are located in the center of the triangle, indicating that they are:                • Private – founded by private entities, not by government. They may even be                founded by individual citizens or legal entities;                • Nonprofit – not founded for the purpose of generating profit;                • Formal – their image and position is adjusted by relevant acts.                The triangle also shows boundary organizations, which represent a transition             at the boundary of one type of division. An example of a boundary organiza-             tion is a private middle school, the function of which is involved in the pub-             lic sector, and which is partially financed from public sources, but which has             a private character. A special type of boundary organization is a state enterprise             that was established for business purposes by a public sector institution and             which attends to state property. A part of the private nonprofit sector is consti-","14                            Nonprofit organizations in selected CEE countries ...                tuted by households that create groups for their activities, but they cannot be             called organizations or institutions because they are informal, i.e. they were not             established based on government legislation. Usually these groups are charity             associations or are focused on free time activities for children. They may be             informal associations that defend the rights of certain groups or communities             outside legislation. They have been described as neighborhood or family asso-             ciations. The nonprofit sector is involved in the for-profit market sector through             the nonprofit activities it practices using available legal forms, e.g. based on the             Commercial Code. This makes it possible to establish stock companies, limited             companies, and cooperatives for charity, education, sports, and other missions             (Rektořík, 2001). Boundary organizations are a place where a nonprofit mis-             sion may deviate from the standard nonprofit activities to favor commercial             activities, in order to secure means for the organization’s operation. However,             sometimes partial or complete deviation from the mission or clients for which             the nonprofit organization was founded may occur.                Hybrid organizations reflect the situation in which the government transfers             part of its responsibility, e.g. for providing certain services to nonprofit organi-             zations. A good example of this is a social enterprise (see Chapter 1.2 and 5).                Another interesting aspect of the nongovernmental nonprofit sector is the             relative size and strength of individual participants. In the past, in both the             Czech Republic and Slovakia, the role of government in providing public ser-             vices was significantly strengthened, similarly to that of countries of northern             Europe. The opposite situation may be the liberalized model in the USA. When             the government role is significantly small, the vacant space is filled by companies             and households. However, households are often unable, either financially or             organizationally, to secure some services alone. This creates a role for nonprof-             its, which often provide the services that the government does not secure and             that households are unable or unwilling to buy from companies. Even when the             government plays a significant role, this does not mean that nonprofit organi-             zations cannot exist. In this situation, they still react to needs; however, these             needs may have other themes, such as free time activities. For example, in the             Czech Republic, where the government now plays a weaker role in sports, there             are numerous sport clubs (Pavlík, 2013), and in Slovakia there are many civic             associations (Kuvíková \& Svidroňová, 2013).                The scope of the nonprofit nongovernmental sector is so diverse that it is             impossible to find a single term to define its organizations. In light of this di-             versity, many authors (e.g. Anheier \& Salamon, 1999; Pestoff, 2006; Rektořík,             2001; Rose-Ackerman, 1996; Toepler \& Salamon, 2003; Weisbrod, 1988; An-             heier, 2014; Sońta, 2011) have expressed a preference for a broader description             of these organizations. One commonly used term is „nongovernmental organi-             zations” (NGOs).","Chapter 1: Theoretical and conceptual foundations                      15                   Anheier and Salamon (1999) used a structural/operational definition. Ac-             cording to this definition, an NGO should meet five characteristics:                 – organized, i.e. institutionalized to some degree in terms of their organiza-                tional form or system of operation;                 – private, i.e. institutionally separate from government;                 – nonprofit-distributing, i.e. not returning any profits generated to their own-                ers or directors but plowing them back into the basic mission of the agency;                 – self-governing, i.e. equipped with their own internal apparatus for govern-                ance; and                 – voluntary, i.e. involving some meaningful degree of voluntary participation,                in the operation.                The structural/operational definition emphasizes the basic structure and op-             eration purposes of the organizations rather than their sources of income.                Based on these characteristics, the following types of nongovernmental or-             ganizations operate in the Czech Republic, Slovakia, and Austria (table 1):               Table 1. Type of nongovernmental organizations fulfilling structural/operational                     definition              Country    The Czech Republic         Slovakia              Austria                      Associations and institutes  Civic associations    Association (Verein)                      (spolky a ústavy)      (občianske združenia)  Foundation (Stiftung)                      Foundations (nadace)                                             Foundations (nadácie)                  Type of NGO  Public benefit organiza- Public benefit organiza- Public benefit organi-                      tions (obecně prospěšné  tions (neziskové organizá- zation (gemeinnützige                      společnosti)                                             cie poskytujúce všeobecne  Kapitalgesellschaft)                                             Noninvestment funds                      Endowment funds        prospešné služby)     Cooperative                      (nadační fondy)        (neinvestičné fondy)  (Genossenschaft)             Source: authors.                  In addition to these NGOs, there are various other organizational types of             nonprofit organizations, including informal nonprofits that are mostly repre-             sented by nonregistered active groups of residents actively involved in local             public affairs, sometimes acting under a joint name.               1.1.2. Theories of the nonprofit sector                Several theories have been advanced to explain the economic role of nonprof-             it organizations. Table 2 introduces the major theoretical approaches, presenting             a summary, key terms, key strengths, and key weaknesses.","16                            Nonprofit organizations in selected CEE countries ...                        Assumes inherent conflict be-  nonprofit provision  based nonprofits?   Scope of theory limited to expe-  faced by deeply concerned stake- holders–what about more con-  ventional nonprofits?  nonprofit constraint weakly en-  possible (for profits in disguise)  Assumes neutral, yet well-mean-  not – conditions unclear  Difficulty in testing counter-  countries/cu                    Key weaknesses  tween government and private   Assumes neutral state; equates  religious and secular value-based  behavior; what about non-value   rience of informational problems   Other institutional responses  possible (government regulation);   forced; indirect profit distribution   ing state; equates value-based and  non value-based behavior; when  will synerg                               Key strengths  Explains part of government- private institutional choice dy- namics in liberal democracies in  the context of public fund short- ages; why nonprofits become   „gap-fillers.”  Explains close link between val- ue base of many nonprofits and  choice of service field such as  health and education (to maxi- mize value impact and formation)  Introduces tr                              Demand heterogene-  ity; median voter; gov-  ernment; quasi-public   Social entrepreneur-  ship; non-monetary   returns; product   bundling; demand   Nonrival goods; infor-  mation asymmetry;   trust; principal-agent   constraint; trustwor-  thiness; information   Philanthropic insuffi-  ciency, particularism,   paternalism, and ama-  teurism; third party   ical                  Key terms  goods       heterogeneity  problems  Non-distribution   asymmetry  government  Comparative-histor-  society relations                         Table 2. Theories of the nonprofit sector  Summary  Theory Unsatisfied demand for public and  Heterogeneity  quasi-public goods in situations of   Theory   demand heterogeneity leads to emer- A.K.A: Public Goods  gence of nonprofit providers or governmental   failure theory  Nonprofit organizations are a reflec- Supply Side Theory   tion of demand heterogeneity, serve","Chapter 1: Theoretical and conceptual foundations                      17                   Serious work on the economic theories of nonprofits began in the early             1970s. All of the theories can conveniently, „if somewhat artificially” (Hans-             mann, 1987), be divided into theories of the economic role of NGOs – failure             theories; and of their behavior – behavioral theories. These theories can be seen             as both competing and complementary.                The first reconciliation of the persistence of nonprofit organizations with             classical economic theory was offered by Burton Weisbrod (1977). His theory             of government failure parallels the more established theory of market failure             (Le Grand, 1991). The failure-based theories of nonprofits explain their ability             to overcome two types of failures (Valentinov, 2009): those involving public             goods, and those involving information asymmetries. The basic assumption for             this government failure/market failure theory is the limitation in the ability of             the market to provide public goods in sufficient amounts. Classic economics             argues that this market shortcoming would serve as a justification for the state             and government. But the government tends to reflect the preferences of median             voters, resulting in the persistence of unsatisfied demands for public goods.             This government failure makes people turn to nonprofit organizations „to sup-             ply the public goods they cannot secure through either the market or the state”             (Salamon \& Anheier, 1998).                Another theoretical approach treats the unsatisfied demand for public goods             resulting from state and market failures as a necessary but insufficient condition             for the existence and importance of nonprofits in a socio-economic context.             This supply-side theory argues that another condition is needed, namely „the             presence of people with an incentive to create NGOs to meet such demand”             (James, 1990).                The interaction mechanism between NGOs and government can also be un-             derstood through the resource dependence theory. „In terms of the interde-             pendence between an NGO and the state, the level of NGO resource dependence             on the government is systematically higher than the other way round; in other             words, the interdependence of NGOs and the state is always an asymmetric one”             (Yaguai, 2012). The unbalanced and bidirectional relationship (NGOs depend             highly on government) should be turned from zero-sum into a win-win strategy.                Trust theories are based on the non-distribution constraint, which is a key             structural feature of NGOs. The prohibition of profit distribution to owners is             an aspect of NGO trustworthiness, because it means that „those involved in             nonprofit organizations are less likely to be in the field solely for the money”             (Hansmann, 1980; ibid, 1987). Nonprofits can be perceived as a solution for             another form of market failure arising from information asymmetries, such as             when consumers lack the information they need to judge the quality of goods             and services they purchase, mainly when the purchaser is not the same person             as the consumer.","18                            Nonprofit organizations in selected CEE countries ...                   The welfare state theory, both failure theories (underlying the heterogene-             ity), and supply-side theories „take as given that the relationship between the             nonprofit sector and the state is fundamentally one of conflict and competition”             (Salamon \& Anheier, 1998). Nevertheless, close cooperative relationships can             occur between nonprofits and government. The possibility of cooperative rela-             tionships is the subject of the interdependence theory. A specific version was             proposed by Salamon and Anheier (1998) called the social origins theory.                A new theory to explain the role and existence of nonprofits in the economy             and society is the rural theory. This theory was formulated by Vladislav Valen-             tinov (2009) and assumes that generally the existence of the nonprofit sector is             a result of the limited abilities of for-profit firms to satisfy human needs (market             failure theory). Valentinov adds to this theory that there are specific character-             istics of rural areas with specific human needs resulting in „rurality-specific             costs”. The rural theory’s general hypothesis is that rurality-specific transaction             costs led to the emergence of rural nonprofit sector organizations. Based on             Valentinov’s assumptions, the recognized empirical relevance and the growing             political popularity of the rural nonprofit sector have not yet been matched by             a corresponding development in nonprofit sector economic theories (Moeller \&             Valentinov, 2012). In fact, a rural nonprofit sector economic theory has been al-             together lacking. Traditional general theories of the nonprofit sector emphasized             its role in providing public goods (Weisbrod, 1998), gaining consumer trust             (Hansmann, 1987), ensuring better consumer control over the production of             goods and services (Ben-Ner, 1986), and serving as an outlet for ideological en-             trepreneurship (Rose-Ackerman, 1996). These theories have clearly been devel-             oped with no regard to the distinction between rural and urban regions. Hence,             none of these theories is adequately positioned to take account of the specificity             of rural conditions in explaining the existence of the rural nonprofit sector. In             line with the traditional nonprofit sector economic theories, the rural theory             assumes that the existence of the nonprofit sector is a result of the limited abil-             ity of for-profit firms to satisfy human needs. The original contribution of the             rural theory is in the argument that some of the limitations of for-profit firms             located in rural areas are related to rural characteristics such as low population             density, geographical dispersion, and poor infrastructure. These characteristics             give rise to „rurality-specific” transaction cost that must be borne by for-profit             firms located in rural areas. The rurality-specific transaction costs constrain             the scope of operation of rural for-profit firms, thus diminishing their ability             to satisfy rural dwellers’ wants and creating a niche for rural nonprofit sector             organizations (Moeller \& Valentinov, 2012).","Chapter 1: Theoretical and conceptual foundations                      19               1.2.  Social economy                 Due to the integration of countries into the European Union, there are sever-             al common definitions on the EU level, although each country defines the social             economy according to their own cultural traditions and economic development             (Mravcová \& Jurčík, 2009).                Jacques Defourny founded a center for the social economy in 1990 and the             European network EMES in 1996, which was legally adjusted in 2002. The aim             of this organization is to build a European database of theoretical and empirical             knowledge from university research centers. The organization was founded at             the Belgian University of Liège, which is also the seat of the International Center             of Research and Information on the Public, Social, and Cooperative (CIRIEC).             Both institutions cooperate with various countries, carry out research and stud-             ies, and issue publications, including theories describing social enterprises and             the social economy in various countries (Dohnalová \& Průša, 2011, p. 31).                As a cooperating workplace, the Faculty of Humanitarian Studies at Charles             University in Prague became involved in the project related to models of so-             cial enterprises and their process of institutionalization in 2013 (Department of             Studies of the Civil Society, online). The aim of CIRIEC, which was established             in 1947, is to collect information, conduct research, and publish works focused             on public benefit services. A key concern is primarily the social economy, which             is monitored throughout the world (CIRIEC, online).                CIRIEC defines the concept of the social economy as a „set of private, for-             mally established companies with autonomous decision-making and freedom of             membership, which were created to meet the needs of their members through             the market and production of goods and services, insurance and financial ser-             vices, where decision-making and any distribution of profits or surpluses among             the members are not directly linked to the capital or fees paid by individual             members, who each have one vote. Social economy also includes private and             formally constituted organizations with autonomous decision-making and free-             dom of membership, which provide non-market services for households and             whose potential surpluses cannot be allocated to economic agents, which create,             control, or finance them” (Dohnalová \& Průša, 2011, p. 36).                The social economy has specific activities defined by the European Economic             Social Committee, including an emphasis on social objectives and social elements             without any prioritized purpose to maximize turnover and profit, and a prefer-             ence for values such as solidarity, social responsibility, social cohesion, demo-             cratic governance, civic participation, autonomy, and combinations of consid-             erations and commitments related to the public interest (Vanický \& Truhlářová,             2008). Events in the European Union have shown that social economy and social             entrepreneurship can unite seemingly contradictory motives, such as economic","20                            Nonprofit organizations in selected CEE countries ...                rationality and social objectives, providing opportunities for including socially             disadvantaged citizens, respect for the local environment, and respect for different             traditions, in order to meet the new challenges (Mravcová \& Jurčík, 2009, p. 56).              1.2.1. Concept of the social economy                 The issue discusses in this chapter begins unusually with a question: Which             came first, the social economy or the nongovernmental nonprofit sector? Pro-             ponents of the social economy argue that the term „civil society” is just a name             for the social economy in the countries of Eastern Europe where the civil society             developed after the fall of communism. Proponents of the nongovernmental non-             profit sector argue the opposite, that the social economy only appropriates what             the nongovernmental nonprofit sector built a long time ago: active citizenship             reflected into founding civic associations. Historically speaking, the nongovern-             mental nonprofit sector has been evolving for longer; in Slovakia its beginnings             date back to the 12  century when various religious fraternities and communi-                               th             ties formed and provided social and health services for the poor (Kuvíková \&             Svidroňová, 2010). The fundamental source of the social economy is the embed-             ding of economic activities in associations with the potential to form organiza-             tions; the genesis of the social economy from a historical perspective is associ-             ated with the growth of freedom of association, especially under the influence of             bourgeois revolutions in the 18  and 19  centuries (Nyssens, 2006). Individuals                                          th                                                  th             associating to achieve a certain purpose, not always economic, are characteristic             of the nongovernmental nonprofit sector, therefore we believe that the nongovern-             mental nonprofit sector was the predecessor of the social economy, i.e. the social             economy has been set aside as a separate area in the natural path of development             of the nongovernmental nonprofit sector. The nongovernmental nonprofit sector             responds to changes in people’s consciousness with its range of products and ser-             vices, and that opens up the space for the social economy. The goal of this chapter             is not to prove which came first or to indicate differences; on the contrary, we try             to find common characteristics of the social economy and the nongovernmental             nonprofit sector in order to strengthen both of the areas in which NGOs operate.                The development of the social economy is unquestionably influenced by the             development of the nongovernmental nonprofit sector that focuses on the pro-             vision of public services, including social services. NGOs earned their position             in the economy of every developed country as social innovators and important             actors in the social economy. Many social economy subjects take the legal form             of civic associations or public benefit organizations. Nongovernmental nonprofit             sector organizations can be seen in a certain light as social economy organiza-             tions. This chapter addresses the shared points of the nongovernmental non-             profit sector and the social economy, summarized in the following table.","Chapter 1: Theoretical and conceptual foundations                      21                Table 3. Comparison of social economy and nongovernmental nonprofit sector                     characteristics                  Sector                                    Nongovernmental nonprofit sector/               Characteristic  Social economy/ social enterprises (SEs)  NGOs              Goal         fulfillment of social mission – to serve  fulfillment of organization’s mission –                           a local community or specific groups of  to provide social benefits                           citizens              Institutions  a wide variety of organizational forms, in- formalized and institutionalized struc-                           cluding public benefit organizations, co- tures, legal form given by law, usually                           operative organizations, joint stock com- associations and public benefit organi-                           panies, and limited liability companies  zations, but also foundations and non-                                                          profit funds              Autonomy     social enterprises are usually created and  NGOs are not part of the public admin-                           managed by a group of people on the ba- istration: they are institutionally sepa-                           sis of an autonomous business plan  rated from the state and have political                                                          independence              Non-distribution  limited distribution of profit to sharehold- NGOs are not founded to generate              constraint   ers or employees and the obligation to re- profit to be shared among the owners or                           invest the profit (or a substantial part of  managers, any profits are fully returned                           the profit) to the social objectives of the  to the organization and used in accord-                           enterprise                     ance with its statutes              Voluntarism  a combination of volunteers and paid  voluntary participation in activities                           staff; a minimum level of paid work   of the NGOs; a high proportion of                                                          volunteering              Civic initiatives  typically the result of collective dynamics  established by citizens for the purpose                           involving citizens or members of groups  of achieving a mutual or generally use-                           sharing a common goal or community need ful purpose/benefit              Entrepreneurial/  business is a main activity; goods and  funded under redistribution mecha-              business activity services are produced, i.e. they enter the  nisms; entrepreneurship is seen as                           market and offer their production for sale a side activity              Funding      financial sustainability depends on the  multisource funding is a principle; this                           performance of members and staff and  may be a combination of public (gov-                           their efforts to ensure adequate resources;  ernment) sources, private and individ-                           activities are also funded through financial  ual sources, grants, membership fees,                           support mechanisms from public and pri- income from self-financing, and busi-                           vate sources; multisource funding is used ness activities              Management   participatory governance, decision mak- self-governance; they manage them-                           ing involves all stakeholders   selves through established organiza-                                                          tional structures; the main body is usu-                                                          ally a general assembly              Registry (for the  register of social enterprises at the Central  relevant registers at the Ministry of              Czech Republic  Office of Labor, Social Affairs and Family  Interior              and Slovakia)             Source: Svidroňová, 2014.","22                            Nonprofit organizations in selected CEE countries ...                   For a better understanding of the differences between the social economy             and the nongovernmental nonprofit sector, we also defined the space for the             realization of the social economy. It can be seen as a space for a specific type of             business-social entrepreneurship. Bearing in mind the sectoral breakdown of the             economy, the space for the social economy/social entrepreneurship can be de-             fined more precisely in two alternatives. In the first alternative, social economy             (social entrepreneurship) is the intersection of the public, private, and nongov-             ernmental nonprofit sectors. The second alternative defines the area of the social             economy (social entrepreneurship) as an independent sector. These alternatives             are shown in figures 3 and 4.                                         Public sector                                           Social economy        Nongovernmental                   Private                                            (social              )LJXUH    6HFWRUDO GHILQLWLRQ RI WKH DUHD RI WKH VRFLDO HFRQRP\\                                                             nonprofit                    sector                                          entreprises              Source: KORIMOVÁ, G. Sociálna ekonomika a podnikanie. 2014. p. 53                                                                  sector                                            sector)               Figure 3. Sectoral definition of the area of the social economy – alternative 1             Source: Korimová, 2014.                                 Public sector                                                              Nongovernmental                                Social economy sector        nonprofit                                                                  sector                              Private sector              Figure 4. Sectoral definition of the area of the social economy – alternative 2             Source: Korimová, 2014.","Chapter 1: Theoretical and conceptual foundations                      23                   The social economy is considered a certain alternative to the public sector             and the market. Its development is related to solving problems of the welfare             state while sharing responsibility for the quality and range of services. This re-             sponsibility should be shared by the public sector, businesses, and the nongov-             ernmental nonprofit sector.                „The concept of social economy is based on the premise that the state and             municipalities can no longer fully meet the diverse and growing needs of the             population, nor fund them; however, that a purely commercial approach does             not meet the demands of a democratic society either” (Mravcová \& Jurčík, 2009,             p. 56). The added value of the social economy is strengthening the use of social             capital. Social capital includes interpersonal relationships, trust, and under-             standing and helping others (ibid). The development of the social economy in             the Czech Republic and Slovakia was primarily a result of inadequate funding             and the necessity of meeting the growing needs of the population (Jurčík, 2009).             An important period in the development of the social economy in both coun-             tries was their entry into the European Union (Hunčová, 2007).                Two key objectives of the social economy are the inclusion of disadvantaged             people in the labor market and the reduction of dependence on state aid. The             state acts as an initial support in social enterprises and facilitates conditions that             could lead to the development of social enterprises (Hunčová, 2007). The social             economy includes activities carried out by cooperatives, associations, and mutu-             ally beneficial organizations, the purposes of which are to provide services to cli-             ents, but not to make a profit (Dohnalová \& Průša, 2011). A definition based on             the European context that is fully adaptable to the current Czech environment             and social economy was approved by the annual membership meeting of TES-             SEA (Thematic network for social economy in the Czech Republic) and revised             in 2011. „The concept of social economy is perceived as a summary of activities             undertaken by subjects of the social economy aiming to increase employment in             local conditions or to satisfy other needs and goals of the community in the area             of economic, social, cultural, and environmental development” (Francová, 2011,             p. 14). The concept of social economy is currently innovatively applied mainly             to self-governed, private, nonprofit entities, whose decision-making processes             include democratic elements. These entities are associations of people seeking             primarily to achieve publicly beneficial objectives by means of economic activi-             ties in the market. All the activities of these associations have positive social             impacts on the surrounding areas (Hunčová, 2007).                Although the social economy was officially recognized by the French gov-             ernment in the 1980s, and over time spread to other European countries, it is             a relatively new concept in Slovakia. With the recent developments in Slovak so-             ciety, a new area of economic activity has emerged which can be termed a social             economy. We agree with Lubelcová (In: Jakab, 2008) that the issue of unemploy-","24                            Nonprofit organizations in selected CEE countries ...                ment is one of the most significant social challenges of the 21st century, standing             in the background of the establishment and development of the social economy.             Modern societies continue to seek an answer to the problem of employing spe-             cific population categories, such as mentally challenged people, young gradu-             ates, single parents, etc. Developed economies produce mainly highly-skilled             professions, but this decreases the range and offer of jobs for low-skilled and/or             unskilled members of the population, which then remain permanently out of             work and stay unemployed. This phenomenon has led to the social exclusion of             vulnerable categories of the population.                Lubelcová (2012) identifies the causes for the social economy development             in Slovakia as follows:                 – the employment crisis – slowing economic growth, restructuring the modern                economy, increasing labor productivity and a consequent increase in unem-                ployment leading to the need to strengthen employment policies (especially                active forms);                 – crisis of the welfare state – long-term unemployment caused increased pov-                erty and social exclusion risks for certain categories of the population, result-                ing in pressure on social policies;                 – taking over from NGOs – social enterprises took over from NGOs’ organization-                al forms, a specific type of management, social objectives, and voluntary work.                According to Pollák (2013, p. 6), the social economy is linked by two princi-             ples: social (solidarity, social inclusion, and social development) and economic             (competitiveness and economic sustainability). The focus on social contribu-             tions and an innovative approach to achieving social economy objectives con-             stitute a major difference between social entrepreneurship and other forms of             private, public, and civil/nonprofit sectors. Social entrepreneurship is character-             ized by three dimensions: social benefits, market orientation, and innovation.             The innovation dimension is described in subchapter 5.2.                In practical terms, „the social economy is made of different types of social ac-             tors who are independent from the public administration, even if they deal with             the production of goods and services supported by public funds because they             prioritize social goals: work before capital, public interest before profit, demo-             cratic participation regardless of ownership interest in an enterprise, potential             profit reinvested to social and developmental purposes.” (Korimová, 2014, p. 51).                One of the main roles of the social economy is improving people’s living             conditions, ensuring the development of individuals as well as various social             groups. The basic objective is to mitigate social inequalities. One of the most             appropriate ways to eliminate these inequalities is the development of social             entrepreneurship.","Chapter 1: Theoretical and conceptual foundations                      25               1.2.2. Social entrepreneurship and social enterprises                 Social entrepreneurship is a part of the social economy, although its charac-             teristics are perceived differently by different authors. The definition of a social             enterprise has similarly varied perceptions, as outlined in the next section. In             social entrepreneurship, a description of the difference between social enterprise             and social integration enterprises is especially important. The summary of terms             and definitions is processed here according to an extensive review of Czech, Slo-             vak, and foreign literature. Subjects and key stakeholders involved in the social             economy that are indispensable for its existence are defined within this chapter.                The key period associated with the first mentions of the social economy is             the early 21st century, when new problems began to appear for which European             countries had to seek innovative solutions. This essentially concerned the in-             creased number of disadvantaged people, connected with the difficulties of their             integration into society. Many problems are related to demographic changes,             including an aging population and the impossibility of securing necessary care             by family members. It is also necessary to pay attention to the quality of life of             the entire population by means of the careful and renewable use of available             resources. Economic globalization has important implications as well. The area             of social economy plays an important role in all these problems, because their             solutions require specific innovations (Jurčík, 2009).                Social entrepreneurship reinforces the importance of self-management with             the purpose of creating resources that will subsequently be used for the imple-             mentation of a given mission. Social entrepreneurship operates on the border             between profit-making and nonprofit entities (Boukal, 2013). The main differ-             ences in the ways how nonprofits and business think are in table 4.               Table 4. Differences in the thinking of profit-making and nonprofit subjects                   Thinking of charity organizations         Business thinking              Maximize profits to meet social needs.  Maximize profits to meet the needs of an                                                   owner or investor.              Providers obtain income by persuading do- Providers obtain income according to compe-              nors to help achieve their mission.  tition based on price and quality.              Success is based on achieving organization- Success is based on abilities to maximize the              al objectives. The main goal is the public  difference between revenues and costs and              interest.                            the achieved profit.             Source: prepared by the authors, based on data from Gidron \& Hasenfeld, 2012.                  In cooperation with other working groups, a more specific modification of             the definition of social entrepreneurship was proposed: „business activities ben-","26                            Nonprofit organizations in selected CEE countries ...                eficial for the society and the environment. Social entrepreneurship plays an im-             portant role in local development and often creates job opportunities for people             with disabilities, or with social or cultural disadvantages. Profit is mostly used             for further development of the social enterprise. Increasing benefits for the pub-             lic is as important as achieving profit”. (Bednáriková \& Francová, 2011, p. 14).                Muhammad Yunus, the Nobel Peace Prize winner and social entrepreneur,             defined the conditions of social entrepreneurship as (Strzelcová, 2012):                 – the business goals are solving problems that threaten society and eradicating                poverty;                 – business must be sustainable both economically and financially;                 – profit is not distributed among the owners or stakeholders but reinvested in                the development of the human capital and society;                 – employees of a social enterprise work in favorable conditions for a market                wage;                 – at least 40% of the workers must be socially vulnerable.                Although social entrepreneurship is a relatively new subject of study, there             is a considerable amount of literature on this topic in Europe. Social entre-             preneurship is an activity aimed at solving social objectives related to market             transactions, which correspond to operations of private organizations (Gidron             \& Hasenfeld, 2012).                According to Borzaga and Defourny, „a social enterprise is mainly a small             or medium company, including cooperatives. Innovativeness can be seen in the             diversity of goals in multisource financing, in a different approach to job crea-             tion, and also in a new type of entrepreneurship, which is a way of bearing risks             on the principle of stakeholders and supporters, including partnerships with the             public sector” (Borzaga \& Defourny, 2001, p.12). In social enterprises, people are             rewarded for their work, but there are also people who work as volunteers. With             this voluntary assistance, which strengthens public confidence in these businesses,             they gain better positions in the market (Defourny, Hulgård \& Pestoff, 2014).                The stability of a social enterprise is required in two dimensions: its long-             term survival and its maintenance of the intended balance of social contribution             and success in the market over time. Survival and growth are the key motivators             for any organization, whether it is for profit or nonprofit. The orientation and             the character of a social enterprise is continuously influenced by financial pos-             sibilities and environmental pressure. Social enterprises are organizations that             are driven by social tasks and apply marketing strategies to achieve social or             environmental purposes (Gidron \& Hasenfeld, 2012).                Social enterprises are required to achieve business success and to fulfill social             objectives with democratic participation, while maintaining their stability over             time and observing the boundaries where the company is a social enterprise and             is able to remain on the market at the same time (ibid). Social enterprises are","Chapter 1: Theoretical and conceptual foundations                      27                just a different kind of company and another kind of charity organization. As             Billis (2010) stated, perhaps business companies need to be more dedicated to             social welfare. Perhaps charities need to be more enterprising and self-reliant.             It is desirable to be a socially responsible company, even if it brings somewhat             lower profits.                Stakeholders in the field of social entrepreneurship are people who are in             some way involved in activities related to the social economy. Key stakehold-             ers are determined according to their nationwide, urban, or regional scale. The             parliament, which approves measures according to a selected program, as well             as municipalities and regions, which are social actors as municipal units of the             state, operate on these levels. The actions of all stakeholders in the social econ-             omy area are strongly influenced by the state. The state’s activity is not clearly             defined, nor is the extent of intervention in a certain sphere. The task of the             state in the field of social entrepreneurship is primarily to create and provide             a space in which there are mechanisms for strengthening social cohesion. State             aid to social enterprises is therefore provided primarily thanks to the change in             attitudes of the government in the area of provision of public services (Kolibová,             Václavíková \& Bělová, 2010).                Social economy activities are carried out by private entities who are founders,             providers, and decision-makers. The founders of public benefit enterprises are             referred to as social entrepreneurs. The founders may also be voluntarily formed             associations of citizens that are independent of the government and take various             legal forms (ibid).                Stakeholders include ministries, government agencies, offices, community             leaders, government organizations supporting local development, community             groups, other social enterprises/cooperatives, business ties, organizations sup-             porting small and medium-sized businesses, banks and financial institutions,             philanthropic organizations, religious organizations, the private sector, educa-             tional institutions, providers of EU subsidies and other providers of subsidies,             local clubs and organizations, and socially responsible entrepreneurs. Stakehold-             ers are essential for social entrepreneurs in terms of supporting and financing             their activities.                Identifying these institutions and groups is essential for establishing work-             ing relationships. The stakeholders that social enterprises should focus on most             throughout their activities are their own employees and the users of services or             products that they offered (ibid).                The social entrepreneurship and its actors were defined by the European             organizations EMES and CIRIEC based on international surveys. Both organi-             zations defined social entrepreneurship on the basis of its subjects according             to a normative and institutional approach. Social entrepreneurship entities are             characterized by a private character, autonomous decision-making, and eco-","28                            Nonprofit organizations in selected CEE countries ...                nomic activity (production of goods or services to people). „The main purpos-             es of social entrepreneurship entities are the services provided to people, the             community, or society; the possibility of partial redistribution of income; and             the democratic principle where decisions are based on the ‘one man, one vote’             principle” (Evers \& Laville, 2004, p. 11). Civil sector and social economy (social             entrepreneurship) organizations are characterized by the shared features of their             subjects, which include voluntariness and self-governance; they are formally             organized and private (ibid). Among these subjects, there are also different char-             acteristics; table 5 provides a review.               Table 5. Subjects of social economy                 Criterion   Subject of the current civil sector  Subjects of social entrepreneurship,                                                          according to CIRIEC and EMES              Establishing an  It does not define objectives.   The main aim is to serve members,              objective                                 a certain community, or society.              Use of profits  A re-distribution of profit is not   A limited re-distribution of profits is                           allowed.                     allowed.              Source: prepared by the authors, based on Borzaga \& Defourny, 2001.                 The first mention of social entrepreneurship appeared in the 19th century, but             its origin and development differs in individual regions. The subchapter 2.4 fo-             cused on the history of social economy will deal with the development of descrip-             tions of social entrepreneurship. Since the first mention of a social economy and             its specification was in France, its development is first described in the European             context, and the incorporation of social entrepreneurship into the Czech and Slo-             vak environment is then described. The developmental stages of a social business             are presented as a synthesis of Czech, Slovak, and foreign sources.","ChapTeR 2                history of the nonprofit sector and social economy                   In order to achieve sustainable development of the nonprofit sector in any             aspect of its justification and functions it has to fulfill in the national economy             and civil society, it is necessary to understand the past and historical develop-             ment. We focus on the history of NGOs in three selected CEE countries: the             Czech Republic, Slovakia, and Austria. These countries were part of the Austro-             Hungarian Empire from 1867 to 1918. During this period there was a nonprofit             sector, represented by charities and various voluntary associations and self-help             groups or institutions providing social and health services for the poor. After             the collapse of the monarchy, the nonprofit sector was developed in the succes-             sor countries of Austria and Czechoslovakia and later on in the Czech Republic             and Slovakia after Czechoslovakia split in 1993. Different political regimes have             affected the nonprofit sector and its formation in these countries (Svidroňová \&             Vaceková, 2013). This holds true also for the social economy in these countries.                2.1.  Development of the nonprofit sector in the Czech Republic                 The description of the development of the Czech nonprofit sector is based             on comprehensive work by Miroslav Pospíšil (cf. Pospíšil et al, 2013; Pospíšil             et al, 2012; Pospíšil, 2009; Pospíšil, 2006), who devoted his professional life to             the research of the nonprofit sector and is one of the main figures in Czech             nonprofit studies.                The tradition of civil society in the Czech Republic dates back to the 9  cen-                                                                                 th             tury. Its long evolution culminated in the later 19  century and early 20  cen-                                                            th                                                                                 th             tury, and in the twenty years of the first Czechoslovak Republic. In the past 25             years (1990–2015), the nonprofit sector in the Czech Republic has experienced             a dramatic transformation during the transition from a totalitarian regime to             a parliamentary democracy.                The most important process contributing to the rise of civil society was the             Czech National Revival, during the 18  and 19  centuries. The purpose of this                                                         th                                                 th","30                            Nonprofit organizations in selected CEE countries ...                movement was to revive Czech language, culture, and national identity. By the             end of the 19th century, the Czech empire had the largest number of charitable             and voluntary organizations in the Austro-Hungarian Empire.                During the First Republic (1918–1938), Czechoslovakia became one of the             world’s most advanced industrial-agrarian countries. The Constitution of Febru-             ary 1920 guaranteed that the new Republic would also be one of the few states             in Europe to have a parliamentary democracy. Consequently, dynamic charita-             ble and voluntary organizations flourished. Some organizations were extremely             popular, almost national institutions (e.g. Sokol). The community life in the             country was based on the existence of volunteer organizations.                The dynamic development of civil society and nonprofit organizations in             Czechoslovakia came to an abrupt end when Hitler’s Wehrmacht occupied the             Czech lands in March 1939. It was the beginning of fifty years of totalitarian             rule, during World War II and the ensuing Cold War. Both the Nazis and the             Communists ruthlessly annihilated everything free and independent, so the free             civil society was a prime target of their repression.                The effects of these totalitarian regimes were devastating. Independent citi-             zen initiatives and opposition to the Communist regime did exist, but remained             fragmented and weak. Both the early scattered opposition of the 1950s and the             mightier reform movement of the Prague Spring in the 1960s were put down by             force. In spite of the admirable work of cultural activists and opposition leaders, the             independent volunteer sector remained small and isolated from the rest of society.                In 1989, the people finally released their long-suppressed frustration, and the             Communist regime collapsed within a week. How did charity and volunteer ac-             tion respond to the new freedom? There were 537 (mass) organizations in exist-             ence at the end of the Communist years; by the end of 1991, there were 21,000;             in 1999, there were 60,000; there are currently approximately 120,000 nonprofit             institutions in the Czech Republic.                In the first months and years after 1989, the number of nonprofit organiza-             tions dramatically increased. The country was receiving massive support from             abroad for the development of civil society and nongovernmental nonprofit or-             ganizations; European and US foundations and NGOs started working in the             country. In spite of their explosive growth, nonprofit organizations and the con-             cept of civil society were generally unfamiliar to the Czech public.                In the 1990s, the rapid growth continued but there was increased awareness             of the need to stabilize the new organizations, to learn necessary skills, and to             improve the legal and fiscal environment for nonprofit activities.                A very positive role was played by the programs of assistance to the nonprofit             sector established by the governments of many western countries and by the             work of numerous foreign foundations and organizations. With their help, the             sector drafted its own legislative proposals and increased pressure on the gov-","Chapter 2: History of the nonprofit sector and social economy          31                ernment and parliament. Towards the end of this period, the long-term pressure             on the government began to pay off, and the relations between the state and the             nonprofit sector began to improve. The excellent performance of the humanitar-             ian organizations brought about a dramatic change in the attitude of the public             to the whole sector.                The nonprofit sector continued to grow rapidly through the end of the 1990s,             but the rate of growth began to slow down after 2002. The sector lacked trust-             worthy representative bodies that most organizations would endorse, although             some of its service and umbrella organizations won wide approval. The attitude             of the government gradually changed from reservation to cautious coopera-             tion. The country became a member of the European Union (2004), which was             a signal to most foreign governments to phase out their assistance programs.                Czech civil society at the beginning of the 21 t century has been insufficiently                                                         s             researched. There was a lack of data available from the Czech Statistical Office             (CZSO) and only patchy and unreliable data from several one-off research pro-             jects. Systematic nonprofit statistics and research did not exist. The situation             began to improve when the CZSO introduced a satellite account on nonprofit in-             stitutions in 2007. By 2010, it had resolved the basic problems that accompanied             the implementation and completed the work on a short version of the account,             so that now there are time series for several years with reliable data on nonprofit             institutions. A change explicitly influencing the Czech nonprofit sector was the             adoption of the New Civil Code in 2014, which brought new organizational             forms of nonprofits and opened opportunities for their profit-oriented activities.                2.2.  Development of the nonprofit sector in Slovakia                 Civic and volunteer activities have had a long tradition in Slovakia. The es-             tablishment of the first nonprofit organizations in this area is related to the             formation and activities of the church. The oldest examples are charities, insti-             tutions providing social and health services for the poor, and various brother-             hoods of religious communities (Kuvíková, 2004).                In the 19th century, many voluntary associations and groups with self-help             missions existed in Slovakia. The first break in the development of voluntarism             occurred in the post-revolutionary years 1848–1849 when most of the associa-             tions ceased to exist.                In the 20  century, there were many regime changes within Slovakia and                         th             Central Europe. Slovakia was under several different regimes: the Austro-Hun-             garian Empire, Czechoslovak First Republic, Slovak Fascist State, Czechoslo-             vak Republic 1945–1948, Communist Czechoslovakia, Czechoslovakia after the             Warsaw Pact Occupation in 1968, Federal Socialist Czechoslovakia, and Federal","32                            Nonprofit organizations in selected CEE countries ...                Democratic Czechoslovakia; the current Slovak Republic formed in 1993. There             have been eight currency reforms and nine constitutions. The country has ex-             perienced numerous political systems, including a parliamentary democracy,             a fascist regime, Stalinism, „normalization”, socialism, and the post-communist             return to democracy (Hochel, 1996). Despite these changes, NGOs and civil             societies were formed in Slovakia.                November 1989 brought political and economic changes and increased civic             activities, as well as the entry of private institutions, including nonprofit organi-             zations, into the economy. The number of private nonprofit nongovernmental             organizations and volunteers soared. By 1993, there were almost 6,000 regis-             tered nongovernmental organizations. In one year, the number increased to             9,800; by 1996, there were already more than 12,000 NGOs. Positive growth was             complicated by the government’s new restrictive laws. Administrative guidelines             and limits for the establishment and funding of organizations made it difficult             for the existence of the nonprofit sector. In 1997, the Act on Foundations was             adopted, which greatly limited the independence of civic activities; as a result,             1800 Slovak foundations were closed. After the 1998 elections, a new coalition             established liberalized regulations regarding the nonprofit sector. Favorable legal             and economic conditions for its further development and existence were created             (Kuvíková \& Svidroňová, 2010). There were attempts in early 2000 to establish             a code for nonprofits that would have summarized all of the acts related to dif-             ferent types of nonprofit organizations, but the attempts were unsuccessful and             the legislation concerning the nonprofit sector in Slovakia remains fragmented.                After the 2010 election, the government emphasized the topic of civil so-             ciety, establishing a representative post for the development of civil society.             Based on the representative’s recommendations, the Government Council for             NGOs, which had operated in Slovakia since 1999, was transformed into the             Committee for NGOs. Resolutions of the Committee were to be automatically             placed as a reminder to relevant materials discussed at parliamentary sessions             (Radvanský et al, 2010). The government that was elected in 2010 ended after             the 2012 election, and the next government came up with a proposal to create             a post for a government representative for national minorities and civil society.             The nonprofit sector did not agree with this proposal, wishing to maintain the             post of an independent representative for a civil society. This issue has not yet             been resolved.                There is no satellite account on nonprofit organizations in Slovakia. Several             universities, organizations, and researchers are dealing with the issues of non-             profits (EUBA, UMB, Majduchová, Kuvíková, Marček, Bútora etc.), but system-             atic statistics do not exist.","Chapter 2: History of the nonprofit sector and social economy          33               2.3.  Development of the nonprofit sector in Austria                 The nonprofit sector has a long tradition in Austria, and many of the NGOs             that are active today date back to the 19  century. The formation of the civil                                                    th             society sector was enabled thanks to the law on registered associations, which             was established in 1867. The most important types of associations, from around             the turn of the century until 1914, were charitable societies and savings clubs,             reflecting the lack of a public system of social security and the necessity for the             working class to save for unforeseen events. The political parties of the Austrian             Republic had their roots in the registered associations that were active in those             times. During World War I, the activity of the nonprofit sector diminished.             However, the sector later recovered and grew very quickly. In the interwar years             – when fascist ideology gained ground in Austria – civil society associations             played an important role in disseminating fascist thoughts, which manifested             themselves within such associations first, especially sports associations. The as-             sociations served to disguise political activity and contributed to keeping fascist             ideology publicly unnoticed until it emerged quite broadly (Simsa et al, 2006).                The steady increase in the number of NGOs after 1925 came to a sudden             end in 1934, when the Social Democratic Party and all associations linked with             it were dissolved and any further activities were forbidden. Associations with             „undesirable” aims were either shut down or brought in line with nationalistic             goals. All Jewish associations were dissolved. Membership in those NGOs which             were co-opted by the regime was partly obligatory (Heitzmann \& Simsa, 2004).             After World War II, in connection with the formation of the Second Republic, the             reinvigoration of the nonprofit sector was greatly influenced by political parties.             Many NGOs were founded or supported either by the Social Democratic Party             or by the conservative Austrian People’s Party (ÖVP). Following the retreat of             the Church from current political affairs, some of the associated NGOs started             to work closely with the ÖVP (Simsa et al, 2006). Due to these affiliations, NGOs             had an enormous influence on politics. This constituted the basis for the corpo-             ratist system Austria has today, within which political parties, as well as the labor             movement, professional associations, and NGOs in general, are represented.                In 1973, many ecological, cultural, and political movements that had been             developing throughout the 1960s resulted in the founding of a huge number of             registered associations. A number of self-help groups and organizations deliver-             ing services emerged, as did charity associations engaging in activities for disad-             vantaged people, such as drug addicts. The number of registered associations in             Austria has increased steadily since then. A more recent occasion that motivated             action within the civil society sector occurred in 2000, when a great number of             initiatives emerged spontaneously during the course of protests against the new             right-wing government (Schneider et al, 2007).","34                            Nonprofit organizations in selected CEE countries ...                   The Austrian nonprofit sector is being researched by several nonprofit schol-             ars, mostly from the Vienna University of Business, including researchers from             the Competence Centre for Nonprofit Organizations and Social Entrepreneur-             ship (http://www.wu.ac.at/ npocompetence/en/).                The most common legal forms for NPOs used in Austria are registered asso-             ciations, foundations, corporations, and co-operatives. The organizational form             of an association clearly dominates the entire nonprofit sector. Corporations             can be awarded the status of a nonprofit corporation by fiscal authorities, if             their statutes codify the nonprofitability and if this can be verified in practice.             Compared to Germany and Switzerland, Austria is able to keep up well with             the participation of people donating. However, the amount of the donations is             considerably higher in other countries. Austria has the lowest amount of do-             nations of the German-speaking countries. In the Austrian nonprofit sector,             many different sources of funding are used. The public sector is by far the most             significant in terms of total volume.                2.4.  History of social entrepreneurship in Europe                 The first mentions of the issues of social entrepreneurship appeared in the             early 19  century (EMES online, 2010). The main reason for the creation of                     th             the contemporary social entrepreneurship sector occurred during the economic             downturn in Western Europe in the 1970s. Rising unemployment caused great             pressure on the social security system. Societies tried to cope with social prob-             lems by introducing innovative programs. In 1980, the national council for re-             lations between mutual societies, associations, and cooperatives drew up the             Social Economy Charter in France. In 1981, France incorporated the concept of             social entrepreneurship into its legislation as a group of organizations operat-             ing on democratic principles that do not belong to the public sector and that             redistribute profit for their own purposes and further development, especially in             the area of improving services for its members and for the whole society. Social             entrepreneurship became a recognized form of business in France and gradually             began to spread to other countries (Dohnalová, 2006).                In 1989, discussions about the concept of social economy began in other             states of the European Union. A number of countries were beginning to focus on             the promotion of social economy being developed by building supporting and             scientific institutions. EMES, a specialized network dealing with the develop-             ment of social entrepreneurship in Europe, was created in 1996 (online EMES,             2015). The first WISE businesses started to appear, with the aim of adapting the             unemployed for the regular labor market and supporting their job searches.             In some areas, the social business sector was strongly supported by govern-","Chapter 2: History of the nonprofit sector and social economy          35                ments, which contributed to its rapid growth. Governments considered social             enterprises to be partners through which socio-economic problems could be             addressed. Effective problem solving was achieved through direct state support             and by the creation of a favorable institutional environment.                Greece became the first country to establish social cooperatives with limited             liability in 1990; Italy followed in 1991, and social solidarity cooperatives began             to emerge in Portugal in 1998. Spain joined this trend with social initiative co-             operatives in 1999.                The social economy sector in Western Europe is largely influenced by legal             structures created by the state, and it is characterized by social purposes, creat-             ing jobs and reducing profit distribution (Defourny \& Nyssens, 2010). As a re-             sult of the 1970 economic recession with the transition to a market economy,             massive displacements occurred in the economy, as did a high unemployment             rate, while the state’s role in addressing socio-economic issues was reduced. In             Eastern Europe, the social business sector was formed as a result of the fall of             communism, when conditions similar to those in Western Europe were reached.             Later, many states attempted to join the European Union, where the conditions             of entry include solving various socio-economic problems. The social enterprise             sector in Eastern Europe is relatively underdeveloped in terms of legal and insti-             tutional definitions (Poon, 2011). Important developments in social enterprises             have occurred in the last decade, particularly since the economic crisis of 2008,             when interest in various forms of social enterprises began to emerge and spread             (Gidron \& Hasenfeld, 2012).                Tables 6 and 7 provide a brief overview of the institutions and bodies that             have been an impetus for the definition of the social entrepreneurship in the             nonprofit sector and the private sector in Europe.               Table 6. Precursors of social entrepreneurship in the nonprofit sector                             Precursors of social entrepreneurship in the nonprofit sector              1890:          Development of universities, freely available libraries, hospitals, parks, concert              Carnegie model  halls, swimming pools, and churches. Their expenses are considered good deeds.              1910–1920:     Investing in organizations that are related to the farming community. Their ex-              Rosenwald model  penditures are considered as sunk costs.              1960–1980:     The development of educational programs based on work with computers, revital-              Norris model   izing urban neighborhoods and rural communities, creation of businesses and                             educational opportunities in prisons, first corporate windmills, mobile medical                             vehicles. Their expenses are considered investments.              1970           Centers for adult day care, early childhood education centers, housing for low-                             income families, training, hospice care, rehabilitation services, computer training                             programs for self-employed people, tutoring centers, prisons, universities, wind-                             mills, rehabilitation centers for mentally disturbed people and substance abusers,                             home care for the elderly.             Source: prepared by the authors, based on data from the Institute for Social Entrepreneurs, 2008.","36                            Nonprofit organizations in selected CEE countries ...                Table 7. Precursors of social entrepreneurship in the private sector                           Precursors of social entrepreneurship in the private sector              1844:                    Outrageous billing prices by owners of factories and traders              Rochdale, England        led 28 workers to gather 28 pounds and open their own shop.              1884:                    Night school for adults, nursery schools, clubs for older              Chicago, Jane Addams     children, public kitchens, cafes, galleries, girls’ clubs, gyms,                                       swimming pools, music schools, drama groups, libraries              1895:                    The beginnings of efficient business.              Boston, Rev. Edgar J. Helms  Employment of immigrants for repair and reconstruction                                       of useless household goods for resale. Income from the sales                                       were used to pay workers’ wages.              1938:                    Wagner-O’Day Act.              Washington, DC           Legislative measure provided jobs for people with severe                                       disabilities.             Source: prepared by the authors, based on data from the Institute for Social Entrepreneurs, 2008.                 The development of social entrepreneurship in European countries is mapped             in the table 8.               Table 8. Key events in the field of social entrepreneurship in Europe                               Key events in the field of social entrepreneurship               1980   First international conference about earning money in a social enterprise; Ashoka’s                      definition of social entrepreneurship emphasized that the purpose of establishing                      a social enterprise is not necessarily profitable, but such activity is not excluded                      Establishment of the first nonprofit consulting firm in the field of social enterprises                      The first international conference on making money in a social enterprise               1982   The first national survey of nonprofit social enterprises (questionnaires)               1984   The National Center for Social Entrepreneurs, an alpha center of public and private                      initiatives               1993   The first official academic program in the field of social entrepreneurship at Harvard                      University (Dees)               1997   The first consulting firm focused on social enterprises in Central Europe and South                      America (Lee Davis, Nicole Etchart)                      School of Social Entrepreneurs (founder: Sir Michael Young)               1998   First national meetings of social entrepreneurs (Co-founders: Jerr Boschee, Jed Em-                      erson, Gary Mulhair, John Riggan, Bill Shore, and Richard Steckel)               2004   Centre for Social Innovations in Toronto                      World Forum SKOLL for social business (Jeff Skoll) aimed at a broader definition                      of social entrepreneurship","Chapter 2: History of the nonprofit sector and social economy          37                Table 8 continued.                               Key events in the field of social entrepreneurship               2005   The UK legislation created a new form of legal person, which gave social enterprises                      access to capital markets and gave social investors the ability to get financial returns                      from their investments into volunteer and community organizations               2006   The University Network for Social Entrepreneurship, based on collaboration with                      professors, researchers, and doctors to develop social entrepreneurship (founders:                      Ashoka, the Skoll Centre for Social Entrepreneurship, Social Enterprise Knowledge                      Network, EMES)               2007   Social Investment Fund Management (UK), established for more than a four-year                      investment period for new and existing social enterprises in health and social services                      The government defines a social company as a business with a primary goal, with                      surpluses principally reinvested in the business rather than used to maximize profits                      for owners and shareholders               2008   First social enterprises combining black, Asian, and ethnic minorities             Source: prepared by the authors based on data from the Institute for Social Entrepreneurs, 2008.                  The events presented in table 9 contributed to the development of social en-             trepreneurship both globally and later in the Czech Republic. The information             covering the period from 2000 to 2015 is based on data from an analysis by the             Institute for Social Entrepreneurs and our own research.              Table 9. Key events in the field of social entrepreneurship in the Czech Republic                                Key events in the field of social entrepreneurship               2009   The thematic network for social economy TESSEA               2010   The principles of social enterprise compiled by TESSEA               2011   Project about social enterprise as a way of thinking in Ostrava               2012   A questionnaire survey of a hundred social enterprises in the Czech Republic                      (P3 – People, Planet, Profit o.p.s.)               2013   ČSOB announced a new grant program with the aim of helping working social                      enterprises               2014   A set of indicators for a social enterprise and social integration company                      (P3 – People, Planet, Profit o.p.s.)                       st               2015   1  quarter – outline of a bill on social entrepreneurship in the Czech Republic                       th                      4  quarter – paragraph version             Source: prepared by the authors, based on data from the Institute for Social Entrepreneurs,             2008, Dotacni.info online, České sociální podnikání online.","38                            Nonprofit organizations in selected CEE countries ...                   The development of Slovak social entrepreneurship is presented in key             events, summarized in table 10.               Table 10. Key events in the field of social entrepreneurship in Slovakia                 Year                                Event              2002       The first scientific and research contacts in Slovakia – conferences and consulta-                         tions with foreign players in the social economy              2002       Establishing the center of research and development of the social economy and                         social entrepreneurship at the Faculty of Economics, Matej Bel University, Ban-                         ská Bystrica              2005       Based on the number of publications and research activities to define the condi-                         tions of social economy in transition economies (particularly in Slovakia), social                         entrepreneurship at the macro and microlevel was defined              2005–2006  Workplace training (as a social enterprise) for people with disabilities, PHARE                         project, funded by the EU              2005–2008  The first international project on social economy and social enterprises in Slo-                         vakia (Slovakia-Flemish project: Social entrepreneurship in Central Slovakia)              2008–2011  Thematic Network for the Development of Social Economy - Operational Pro-                         gramme Human Resources and Employment, international project              2008       On the legislative level, social enterprise is defined in the Act on Employment                         Services, creating the Register of Social Enterprises              2008       The accredited course „Social Enterprise Manager” was successfully tested; in                         2008 there were 36 successful absolvents             Source: prepared by the authors, based on Korimová, 2014.                 Social enterprises have developed significantly over the last decade; specifi-             cally since the economic crisis in 2008, the interest in social enterprises has been             increasing and various forms of social enterprises have been spreading (Gidron             \& Hasenfeld, 2012).","ChapTeR 3                               Importance and justification                         of private nonprofit organizations                   Nonprofit organizations carry out a number of important functions in the             economy. In addition to the services provided by them in the social sphere such             as assistance to the poor, the disabled or the homeless, the services aimed at             changing the society have also been gaining in importance. No less significant             are the benefits of providing these services by private nonprofit organizations             in comparison with the public production. Nonprofit organizations are not only             a complement to the provision of services in the areas where the state has been             failing, but an equal partner of the public and business sector.               3.1.  Empirical testing of theories of the nonprofit sector in Slovakia                  To examine the economic theories that motivated the establishment and             justify the existence of nonprofit organizations in Slovakia, we started a pilot             research project in 2015 in which we approached 280 organizations by e-mail             with a questionnaire. A total of 60 organizations responded. The sample reflects             the current state of the structure of NGOs in Slovakia. The appropriateness of             the structure and the scope of the sample were confirmed by the statistical sig-             nificance of the results of a Chi-square test.                We used the Friedman and Wilcoxon tests to examine whether nonprofit or-             ganizations had a particular reason or motive for being established. In analyzing             the dependence of economic theories on other factors such as region, location,             legal status, core work organization, etc., we used Pearson’s chi-square test of             independence. If there was a confirmed dependency, we measured the level of             intensity of dependence with Cramer’s V. All statistical analysis was done using             SPSS (Statistical Package for the Social Sciences) software.","40                            Nonprofit organizations in selected CEE countries ...                   The respondents were different types of nonprofit organizations located             throughout the territory of Slovakia; table 11 shows the locations in all eight             Slovak regions.              Table 11. Location of the nonprofit organizations by region                             Region                        Number of organizations               Banskobystricky                                      5               Bratislavsky                                         16               Kosicky                                              2               Nitriansky                                           4               Presovsky                                            7               Trenciansky                                          14               Trnavsky                                             7               Zilinsky                                             5             Source: authors.                 Of the total sample of 60 organizations, 48 were active in the city/town, ac-             counting for 80% of the total number of organizations involved; the remaining             12 functioned in the villages/countryside, representing 20% of the total number             of organizations involved.                The respondents varied depending on the size of the municipality in which             they operated. Most organizations were located in cities with a population of             over 100,000 inhabitants (15 respondents) and in towns with between 50,000             and 99,999 inhabitants (14 respondents). The fewest respondents said that they             operated in municipalities with populations smaller than 199 or between 500             to 999 inhabitants. For a better overview of the answers of all respondents, we             presented the results in a figure (figure 5).                The largest share of nonprofit organizations involved in the research, a total             of 46 respondents, had the form of a civic association. Two organizations had             the form of a foundation, three organizations were noninvestment funds, and six             were established as organizations providing generally beneficial services (pub-             lic benefit organizations). The remaining three organizations chose the option             „other” (an association of legal entities and unspecified nonprofit organizations).             An overview is presented in the following figure (figure 6).","Chapter 3: Importance and justification of private ...                 41                                             200 - 499  500 - 999                                            3%         2%                                          0 - 199      1000 - 1999                                           2%            5%                                                           2000 - 4999                                                             8%                                    over 99999                                     25%                                                      5000 - 9999                                                       10%                                   50000-99999                                     23%                                              20000-49999                                                15%          10000 - 19999                                                                 7%              Figure 5. Share of the respondents by the size of municipality in which they operate             Source: authors.                  30                                        26                 25                  Number of organizations   15        11            11           9                 20                       10                    5                          3                   0                     less than 5 years   6 - 10 years  11 - 15 years  16 - 20 years  more than 20 years                                              Age of organizations             Figure 6. Legal form of the respondents             Source: authors.","42                            Nonprofit organizations in selected CEE countries ...                   Figure 7 shows that the respondents were usually active in the nonprofit sec-             tor for 5 to 10 years.                   30                                        26                 25                   Number of organizations   15        11            11           9                 20                      10                    5                          3                    0                     less than 5 years   6 - 10 years  11 - 15 years  16 - 20 years  more than 20 years                                              Age of organizations             Figure 7. Age of the respondents (how long they operated in the nonprofit sector)             Source: authors.                  To describe the size of respondents we used two characteristics: number of             employees and/or volunteers (table 12) and size of the annual budget (table 13).               Table 12. Overview of full-time and part-time employees and volunteers in respond-                      ents’ organizations                                                          Number of organizations                                                         Yes                No               Full-time employees                        13                 47                    – up to 5 employees                   7                    – 5 – 9 employees                     2                    – 10 – 20 employees                   3                    – more than 20 employees              1               Part-time employees                        14                 46                    – up to 5 employees                   11                    – more than 5 employees               3","Chapter 3: Importance and justification of private ...                 43                Table 12 continued.                                                          Number of organizations                                                         Yes                No               Volunteers*                                50                 9                    – up to 5 volunteers                  5                    – 5 – 10 volunteers                   21                    – 11 – 20 volunteers                  12                    – 21 – 50 volunteers                  9                    – 51 – 80 volunteers                  2                    – more than 80 volunteers             1             * – the sum of organizations with volunteers is not 60, as one organization reported only occasion-             al volunteer help for special events.             Source: authors.              Table 13. Size of the annual budget in the respondents’ organizations                  Annual budget (in thousands of €)        Number of organizations                Less than 1                                         9                1- 5                                                15                5 - 10                                              12                10 - 20                                             7                20 - 50                                             4                50 - 100                                            5                More than 100                                       8             Source: authors.                 Based on their reported fields of operation, the respondents covered all of the main             areas in which nonprofit organization operate and provide their services (table 14).              Table 14. Areas of operation of the respondents                             Areas of operation               Number of organizations*              Health care                                               8              Education                                                 12              Sport                                                     10              Welfare                                                   15              Human rights                                              1              Culture and art                                           8              Religion and spiritual development                        4              Environment                                               4              Others (research and development, family issues, lei-     5              sure activities, drug prevention, not specified)             * – the sum was greater than 60, as respondents could choose up to three fields in which they operated.             Source: authors.","44                            Nonprofit organizations in selected CEE countries ...                   Figure 8 shows the reported activities of the responding nonprofit organiza-             tions. The respondents were mostly service producers (43%); 40% could not             identify themselves using the provided options and they chose „other”, mostly             stating that their activities were a combination of watchdog and service or ad-             vocacy and service organization.                                                    Watchdog                                                 organizations                                                    2%                                                        Advocacy                                                    organizations                                                       15%                                        Others                                         40%                                                    Services providing                                                    organizations                                                       43%                 Figure 8. Reported activities of the responding nonprofit organizations             Source: authors                  We assigned each nonprofit organization an economic theory in accordance             with the reason they cited for their foundation. The results are shown in table 15.             Respondents chose from among the available answers, shown in the first col-             umn, and we assigned them directly to particular theories, shown in the second             column. The third column reflects the number of organizations that selected the             particular theory. The sum of respondents is greater than 60, since they were             allowed to choose up to three reasons for their creation and existence.                The table shows that eight respondents selected the option stating that they             wanted to do some kind of business and a legal form of nonprofit organiza-             tion was the most suitable way for them to do so, because with their activities             they would achieve a profit, but these activities fulfilled the characteristics of             a general benefit. The organizations reinvested their achieved profits in the core             business, as required by legislation.                The most commonly selected theory was the supply side theory, chosen by 30             organizations involved in our research, representing half of the total surveyed             organizations. This preference was confirmed by the Friedman test, which we","Chapter 3: Importance and justification of private ...                 45                used to find whether the organizations were created for the same reason (theory)             or if there was a more preferred theory. Based on the results of the Friedman             test, the nonprofit organizations clearly preferred the supply side theory as the             reason for their creation and existence. Only one organization chose the third             party government theory.               Table 15. Theories of creation and existence of the respondents                                                                             Number                       Reason for establishment/creation        Theory    of organizations              Nonprofit organization was created based on the per- Supply side theory  30              sonal interests of its founder, i.e. founder followed their              own needs and motives for self-realization. Or (the or-              ganization) wanted to provide a service to ourselves; we              created an association that provides mutual benefits to              its members.              This product / service was needed for the community of  Rural theory  7              people living in rural areas; we wanted to contribute to              the development of the community/locality.              We perceived the need for a nonprofit organization in  Interdependence   17              the locality /in Slovakia in addition to public and private  theory              profit organizations, so we were established.              We perceived that the market lacked a trustworthy part- Trust theory    2              ner and in our opinion a nonprofit organization was  (information              a more credible producer of goods / services to the con- asymmetry              sumer, so we were established.               theory)              We established our nonprofit organization as an atypical  Entrepreneurship   8              form of business; we did not want to create a business or  theory              social enterprise, but the activities that we do are publicly              beneficial (beneficial for the wider environment) and by              these activities a profit can be produced, which we return              to the main activities of the organization.              The government did not provide a service / product at  Heterogeneity   10              the national or local level because it lacked the capacity  theory              (financial, personnel, etc.), or the product was provided  (government              by the government but with signs of cronyism or corrup- failure theory)              tion, so we were established.              We were established in partnership with government/lo- Third party    1              cal government. Government helped us with the founda- government              tion; the government (national, regional or municipality)  theory              was our founder.              No private companies provided such a service / product  Heterogeneity   13              because it would be unprofitable for them, i.e. there was  theory              a lack of such a service in the market, so we were estab- (public goods              lished to provide it.                        failure theory)              Source: authors","46                            Nonprofit organizations in selected CEE countries ...                   The reason for establishing a nonprofit organization may depend on many             factors, including the region in which the organization operates, the popula-             tion in the area, the location of the organization in an urban or rural area, areas             of operation, and type of activity. It may also depend on the legal form, but             since most of the surveyed organizations were civil associations, we considered             it unnecessary to examine the dependency of the theory on the legal form of             organization. We did not have sufficient responses to evaluate correlations for             other legal forms.                To evaluate the dependency of the selected reason for the establishment and             existence of the nonprofit organization on various factors, we used Pearson’s             chi-square test of independence. Where a dependency was confirmed, we used             Cramer’s V to measure the intensity of the dependency. All calculations were             made using SPSS statistical software, and the results were reviewed with an ex-             pert in the field of statistics.                The following table 16 presents an overview of the theories of nonprofit or-             ganizations with confirmed dependencies (for the sake of brevity, we show only             those theories where dependencies were confirmed).              Table 16. Overview of economic theories of nonprofit organization existence with                      confirmed dependency                  Economic theory                   Confirmed dependency              Trust theory              – the region in which a nonprofit organization operates              Interdependence theory    – the number of inhabitants in the municipality in which                                       a nonprofit organization operates                                        – area of operation in which a nonprofit organization operates              Rural theory              – the number of inhabitants in the municipality in which                                       a nonprofit organization operates                                        – area of operation in which a nonprofit organization operates                                       (health care, welfare, education, environment…)              Heterogeneity theory      – type of activities that nonprofit organization carries out as                                       their core work (service, advocacy, etc.)             Source: authors.                  As can be seen in table 16, dependency was confirmed only in four theories             of the existence and establishment of nonprofit organizations: trust theory, in-             terdependence theory, rural theory, and heterogeneity theory (based on govern-             ment failure).                For the trust theory (or information asymmetry theory), we confirmed the             dependence on the region in which the organization operates. All of the re-             spondents that chose this theory were from the Zilinsky region. They felt con-","Chapter 3: Importance and justification of private ...                 47                nected to this theory because the market lacked a credible producer of goods             or services and nonprofit organizations could be a solution to the problem of             untrustworthy for-profit commercial organizations. These organizations could             use this fact as an argument to gain more support from the region.                For the interdependence theory and the rural theory, we confirmed the de-             pendence on the population in the municipality and on the area (field) in which             the nonprofit organization operated. The rural theory was chosen to a greater             extent by respondents who work in rural areas, mostly in villages with less than             5000 inhabitants. We thus indirectly confirmed the importance of this new the-             ory. It would be desirable to pay more attention to the research of this theory             in order to identify the specific needs of these organizations and design tools to             support them. Nonprofit organizations can greatly benefit a municipality, and             the municipality should therefore encourage their establishment and existence,             in the form of subsidies or tax credits in local directives. The interdependence             theory was selected by organizations operating in cities with larger populations.             This shows that nonprofit organizations are complementary with for-profit or-             ganizations in urban areas, where the economy is developed at a higher level and             there are better conditions for such cooperation.                The last confirmed dependency was of the heterogeneity theory, the depend-             ence of the type of activities performed by the organization on government fail-             ure. The government in such cases did not produce enough goods and services,             and governmental activities were insufficient to support interests of others, so             these nonprofit organizations were created to cover the gap. When the govern-             ment fails, the solution may be the market and profitable businesses, but it is             also the nonprofit sector and social enterprises (see also table 3, p. 21, where we             compare social and nonprofit sector organizations). In the following table 17,             we compare classic, social, and nonprofit enterprises. The purpose of this table             was primarily to demonstrate the benefits of nonprofit business as compared to             classic or social entrepreneurship.                The advantage of doing business as a nonprofit organization is that nonprofit             organizations do not all have to have equity; only two legal forms, foundations             and non-investment funds, require equity; the rest do not have to have any as-             sets to start their activities. Although nonprofit organizations are not established             for doing business, they can conduct business activities if they meet the condi-             tion of reinvesting profit into their main activities /core work. Revenues gained             through the main activity for which they were established are exempt from in-             come tax. Thus, if the nonprofit organization develops activities that meet the             nature of their core work and fulfill a generally beneficial purpose, the nonprofit             organization can be regarded as a specific form of business/ entrepreneurship.             Establishing a nonprofit organization is easier, faster, and less expensive than             setting up a commercial enterprise.","48                            Nonprofit organizations in selected CEE countries ...                Table 17. Basic characteristics of commercial, social, and nonprofit entrepreneurship                  Type of entre-                      preneur-    Commercial           Social            Nonprofit                         ship   entrepreneurship   entrepreneurship    entrepreneurship               Characteristic              Goal           main goal is to achieve  fulfillment of social mis- fulfillment of organiza-                             profit              sion – to serve a local  tion’s mission – to pro-                                                 community or a specific  vide social benefits                                                 groups of citizens              Equity         depends on the legal  Depends on the legal  obligatory only for foun-                             form (e.g. for Ltd. which  form        dations and noninvest-                             is the most common                     ment funds                             form, it is at least €5,000)              Business activity   business is a main activ- business is a main activ- funded under redistribu-                             ity, the reason why the  ity; goods and services  tion mechanisms; entre-                             company was established are produced, i.e. they  preneurship is seen as                                                 enter the market and of- a side activity                                                 fer their production for                                                 sale              Tax exemptions  no tax exemptions   no tax exemptions  no income tax on the                                                                    income from the main                                                                    activity (core work), no                                                                    income tax on income                                                                    from tax assignation              Duration       depends on the legal  depends on the legal  up to 30 days, usually up              of establishment   form (e.g. for Ltd. it is  form; to register it is  to 10 days              procedure      between 15 and 21 days) necessary to obtain the                                                 status of a social enter-                                                 prise, and it is question-                                                 able whether this status                                                 will be approved              Registration   business register   register of social enter- relevant registers at                                                 prises at the Central Of- the Ministry of Interior                                                 fice of Labor, Social Af-                                                 fairs, and Family              Registration fees  depends on the legal  depends on the legal  usually €66 per                             form (e.g. for Ltd. it is  form        registration                             €331.5 for the registra-                             tion in the business                             register, plus between                             €5 and €15 for other ad-                             ministration fees)             Source: authors.                  Maybe for these reasons, eight of the survey respondents chose entrepreneur-             ship theory; their nonprofit organizations were founded as an atypical form of             business. Their primary goal was not to establish a business or social enterprise,","Chapter 3: Importance and justification of private ...                 49                but their activities were generally beneficial and could make a profit, which was             then returned to the core work of the organization. For the founders of nonprofit             organizations, this may be a fake business.                Vaceková and Prouzová (2014) stated that due to the commercialization of             nonprofit organizations, something like „for-profits-in-disguise” are emerging.             These „false” nonprofits may maximize profits that they then distribute in a dis-             guised form (as higher wages and perks), or they may maximize revenues that             lead to power and prestige for their managers. „They are lured into the non-             profit sector by the tax and subsidy advantages that they gain therefrom” (James,             2000). Another interesting phenomenon is „false commercialization” which oc-             curs when nonprofit organizations carry out commercial activities with the sole             and explicit aim of covering the costs of the nonprofit mission for which they             were founded (see Commercialization of Nonprofit Organizations).               3.2.  Functions of private nonprofit organizations in society                 Nonprofit organizations fulfil a large variety of functions in democratic so-             cieties (Neumayr et al., 2007). Following Boris/Mosher-Williams (1998), social,             civic, and economic functions can be detected. A closer look at the categori-             zations of NPOs’ functions offered in literature, however, shows that they are             manifold and differ a lot (see, for example Kramer 1981, Salamon et al. 2000,             Land 2001, Bolečeková 2010). The functions of NGOs are identified in table 18.               Table 18. Concepts of NPOs’ functions identified in literature                                         Author                                                   Salamon /   Sokolowski  Ackerman  Frumkin  Salamon /               Funktion                                  Estelle /   Rose   Land  Kramer  Kendall  Hems              Service / /Service providing              Expressive role (and leadership development              role) /Value guardian role and volunteerism /              Representational function              Philanthropy              Charity              Improve / Advocacy role              Vanguard role and service pioneer /              Innovation function              Community building (and democratisation              role) /Fellowship / Social capital              Social entrepreneurship             Source: Neumayr et al., 2007.","50                            Nonprofit organizations in selected CEE countries ...                   The role of nonprofit organizations in democratic societies forms a topic of             perennial interest in the political arena as well as in socioeconomic research.             NPOs may fulfil two major functions in contributing to security and stabiliza-             tion of society but at the same time stimulating societal advancement: In a num-             ber of countries NPOs take a mainstay role in integrating disadvantaged groups             through the provision of social services and hence constitute „social mollifiers”.             Simultaneously, NPOs assume an „expressive function”, giving a voice to so-             cietal issues such as the protection of the environment. It cannot be assumed             that the expressive function and service orientation are dichotomous variables.             A majority of socially active NPOs identify themselves with both functions even             though this may inevitably lead to tensions within the organization between             those who prefer the income generating service activities and those who push             for the expressive obligations. Hence it remains unclear how organizations are             being classified that are active in both fields. Also observed there is a major lack             of a concise method in classification systems such as the International Classifica-             tion of Nonprofit Organizations (ICNPO) that allows to fully delineate advocacy             (Neumayr et al., 2007). Majduchová et al. (2004) apart from service function             and expressive functions, adds these three more functions of NPOs:             1.  The innovative function. The nonprofit sector can also be a source of various                innovations. Whether it is the use of technologies, new methods of educa-                tion, or innovative procedures of citizen mobilization. The innovative func-                tions of the nonprofit sector lead to creating a more challenging environment                for the work of public organizations.             2.  The advocacy function or the social change function. These functions lie in                defending or promoting the interests and rights of individuals or specific                groups of citizens. In the Czech Republic and Slovakia, this function is one                of the most important because it contributes to the transformation of society.             3.  The function of community building and the democratization function. It                is a very important function in the Czech Republic and Slovakia where the                former regime adversely affected the development of community life and                the natural mechanisms of citizens’ mobilization as regards public affairs                governance.                It is evident from the given definitions of the NGOs’ functions that the role             of NGOs in society is very important. On closer inspection of the functions of             nonprofit organizations, we can see that the role of the nonprofit sector consists             in taking an active part in shaping democracy and diversity, and in controlling             the rules adopted in society.                The empirical research conducted in the Czech Republic and Austria (c.f.             Pospíšil et al., 2009) revealed that the most important function of NGOs in both             countries was providing services. According to the criterion of the share of the             hours worked in implementing this function, the prevalence of the service func-","Chapter 3: Importance and justification of private ...                 51                tion is over one half in one country (the Czech Republic, 56%), and completely             dominant in the other country (Austria, 75%). NGOs in both countries dedicate             less energy to the remaining two functions. Taking into account the allocation             of working hours, the second most important function is community building             (33% in the Czech Republic, 19% in Austria), followed by the advocacy func-             tion (11% in the Czech Republic, 7% in Austria). Although the performance             of the community-building and advocacy functions is better (36% and 22% in             the Czech Republic, 35% and 27% in Austria) when the subjective performance             evaluation is applied, service providing still remains the main function of Czech             and Austrian NGOs even according to this criterion. Unfortunately, no research             focused on empirical verification of the functions fulfilled by private nonprofit             organizations has been conducted in Slovakia yet. However, given the similar             historical development in Slovakia and the Czech Republic, similar outcomes             can be expected.                In the past, Slovakia, the Czech Republic and Austria shared their common             destiny in one state entity and so the societies in these countries stem from the             same or very similar roots. These countries boasted a dynamic nonprofit sector             in the 19th century but because of their different fates after the collapse of the             Austro-Hungarian monarchy and especially after World War II their respective             civil society environments are quite different today. Undoubtedly, the develop-             ment in the second half of the twentieth century plays a crucial role as regards             today's differences in the size, structure and behavior of nonprofit organizations             in the Czech Republic and Slovakia compared to Austria. Austria managed to             slip out of the Soviet sphere of influence after World War II, and since 1955,             i.e. since the conclusion of the Austrian Independence Treaty with the four oc-             cupying powers that restored the autonomy and independence of Austria, the             country has been free to develop as part of the democratic Western Europe.             The renewed Czechoslovak Republic was not so lucky and so the short period             of Nazi occupation and totalitarianism was followed by the much longer Soviet             totalitarianism lasting for more than forty years. The country had not liber-             ated itself from it until 1989 when the whole Czech and Slovak society slowly             started returning to democracy, first as part of Czechoslovakia, and in a sepa-             rate state since 1993. To put it in a superficial and simplified way, the Austrian             society today is a stable democracy, which is a result of half a century of unin-             terrupted democratic development; while the Czech as well as Slovak society is             still in a stage of transition from half a century of totalitarianism to democracy             (Pospíšil et al., 2009).","52                            Nonprofit organizations in selected CEE countries ...               Nonprofit Organizations as Providers of Services of General Interest                 In terms of their beneficial effect (the benefit they bring), the nature of the             services that private nonprofit organizations provide can be as follows (Kuvíková             \& Svidroňová, 2010):                • mutually beneficial services: private nonprofit organizations implement the                interests of their founders, direct their activities at meeting the needs of                a small group of people (an interest group), are established on the member-                ship base, for example. civic associations, political parties and movements,                chambers, clubs, associations, and others;                • generally beneficial services: private nonprofit organizations meet generally                beneficial objectives and serve everybody under the same conditions that                are known in advance, for example civic associations, foundations, non-                investment funds and nonprofit organizations providing generally beneficial                services, in particular as follows:                   – provision of health care,                   – provision of social assistance and humanitarian care,                   – creation, development, protection, restoration and presentation of spiritual                  and cultural values,                   – protection of human rights and fundamental freedoms,                   – education and development of physical culture,                   – research, development, scientific and technical services, and information                  services,                   – creation and protection of the environment and protection of public health,                   – services in support of regional development and employment,                   – the provision of housing; management, maintenance, and renewal of the                  housing stock;                • public utility services: private nonprofit organizations carry out tasks related                to the public interest, fulfil the tasks of the municipality or the state, or secure                other public functions; they are subject to public scrutiny and usually have                financial relations with public budgets.                It is possible to polemicize whether the mutually beneficial services, this             means the services which meet the needs of a small group of people, can also be             perceived as generally beneficial from a broader point of view. In many cases,             traditions are preserved, non-traditional forms of education are created, sports             and culture are promoted, and the spare time of members is filled in with mean-             ingful activities (which can be understood as prevention of socio-pathological             phenomena in society) when „hobbies” of an organization’s members are „sup-             ported”. It is therefore questionable whether the mutually beneficial activities are             not generally beneficial in a wider perspective as they benefit the whole society.","Chapter 3: Importance and justification of private ...                 53                   Provision of public utility (generally beneficial) services is referred to as the             service role. There are hypotheses that services provided by private nonprofit             organizations meet one or more of the following characteristics (ibid):                • Higher quality - since they are not profit-oriented, they provide services of                a better quality than commercial facilities. NGOs are also more flexible, be-                ing able to provide different (auxiliary) services, for example in the area of                community development, along their main service, which in a way increases                satisfaction of consumers. Hence, the quality of services can be evaluated as                superior.                • More justice - nonprofit organizations have more intensive motivation to                serve those who need it most, the services are more equitably distributed                than in the case of commercial enterprises that „discriminate” against those                who cannot pay. This attribute does not have to be necessarily present com-                pared to the provision of services by government NPOs.                • Lower cost ratio, higher efficiency - nonprofit organizations can reduce the                costs of their services and achieve greater efficiency by deploying volunteers                and the funds of a charitable and philanthropic character. At the same time,                by using other than state resources, private nonprofit organizations strength-                en their autonomy and sustainability in the market of the provided services                of general interest.                • Specialization - based on their mission, values and knowledge of the com-                munities in which they operate, NGOs may specialize in a particular issue,                a group of citizens, a type of intervention and service delivery.                From the perspective of public economics, another specific feature related to             the provision of services results from the information asymmetry on the part             of the consumer (Chiang \& Venkatesh, 1988; Bloom, Standing \& Lloyd, 2008).             Consumers cannot accurately assess the quantity or quality of the provided ser-             vices. Their limited assessment ability results either from the conditions under             which they consume the service in question, or of the nature of the service itself.             The nonprofit principle represents a certain protection against the information             asymmetry. On the grounds of the nonprofit principle, the managers and owners             of private nonprofit organizations are very limited in the possibility to enrich             themselves by providing services in a lesser than promised extent or lower than             promised quality and therefore have neither motivation nor incentive to such             a conduct. It was Weisbord who pointed out to this fact already in 1988, when he             argued that the nonprofit organization that were not motivated by making prof-             its had other goals than profitable businesses and would not skimp on quality or             quantity of the services provided at the expense of poorly informed consumers.             The advantage of the provision of those services by private nonprofit organiza-             tions, compared to profitable companies, lies, inter alia, in reducing the degree             of the information asymmetry on the part of the consumer.","54                            Nonprofit organizations in selected CEE countries ...                   If we look at the original division of the economy into three sectors from the             perspective of the provision of services of general interest, we can conclude that             the provision through the Government and the business sector has been failing.             The first sector (the Government) does not have the capacity to provide all the             services to the extent required, the second sector (enterprises and commercial             organizations) does not provide the service of interest due to their nonprofit             nature (the services do not generate profit, they are not attractive for the second             sector). In consequence, these services need to be provided by the third sec-             tor, which can also entail possible advantages as compared to the production             of these services by the public sector, as a number of authors conclude. Pestoff             (2006) points out the fact that the third sector has been losing its peculiarity as             a result of the concluding of contracts with the public sector, contracting, pri-             vatization, and performance measurement. Private nonprofit organizations take             on more of the characteristics of both the public sector (e.g. institutionalization)             and the business sector (maximizing revenues, however without maximizing             profits), thereby giving rise to hybrid and mixed organizations (ibid). The Gov-             ernment is no longer interested in the third sector as such, but in how and what             it can contribute to the quality of public services. Billis and Glennerster (1998)             in their study look at possible comparative advantages of the third sector as op-             posed to the first and second sector. They claim that there are certain structural             characteristics of organizations in each sector (ownership, interested parties –             „stakeholders” and resources) that predetermine these organizations to respond             in different manners to different „disadvantages” on the side of their customers,             such as the already mentioned information asymmetry, and also financial, per-             sonal or social disadvantages of consumers (ibid).                Nonprofit organizations also have comparative advantages from the perspec-             tive of public finances, in particular in the areas where their hybrid and mixed             character allows them to overcome the problems associated with contracted             provision of public services, that is referred to as the principal-agent relation-             ship, where a public body concludes a contract with a private entity; risks appear             in the form of moral hazard, wrong choices, the problems of hidden informa-             tion and conflicts of interest (see Arrow, 1985; Nemec, 2002). There are no such             problems when public services are provided by private nonprofit organizations.                From the perspective of the public choice theory, private nonprofit organi-             zations have further advantage over the public sector, which is controlled by             the Government, namely, that they not meet with the resistance of the median             voter (the voter who decides between the proposed alternatives in public choices             when the number of voters preferring one or the other alternative is the same).             Private nonprofit organizations (similarly to profitable organizations) are gov-             erned by the requirements of the market and provide those services for which             there is interest, although the provision of these services is not profitable.","Chapter 3: Importance and justification of private ...                 55                   Nonprofit organizations have a mixed role – some of them operate as insti-             tutions providing public services (of general interest) in a more cost effective             manner compared to the other providers, while some of them act as „advocates”,             pushing the society to fundamental changes (Edwards et al., 1999).                On the basis of the above mentioned benefits of the provision of services of             general interest by private nonprofit organizations, we conclude that private             nonprofit organizations have their importance and their existence in the na-             tional economy is justified.               3.3.  Evidence on private nonprofit organizations in the Czech                    Republic, Slovakia and Austria                 The description of the development of the nonprofit sector in the Czech Re-             public and Slovakia was based on an analysis of relevant statistical data. Table 19             shows the development of the Czech nonprofit sector from 2009 to 2012, with             changes in important absolute and relative characteristics.               Table 19. Development of the nonprofit sector in the Czech Republic from 2009 to 2012                                Year                     2009    2010    2011    2012              Number of units                          10,3868 109,209 114,185 118,375              Production (in million CZK*)              93,447  97,553 100,168 106,701              Gross added value (in million CZK*)       57,097  59,873   62,324  69,166              NPO share in GDP (in %)                     1.52    1.58    1.63     1.69              Number of FTE employees                   95,186  97,068    98,53 100,174              Number of FTE volunteers                  27,145   25,04   25,984  25,964              Share in the employment rate (in %)         1.89    1.93    1.96     2.04              Revenues              Payments for market output (in million CZK*)  17,185  18,109  18,853  15,149              Payments for non-market output (in million CZK*)  16,611  18,818  18,658  20,200              Property income (in million CZK*)          1,491   15,69    1,096   1,236              Other current transfers (in million CZK*)  59,632  59,848  60,929  65,153              Voluntary work (in million CZK*)           6,704   6,087    6,510   5,648              * – 1 EUR = 27,03 CZK, exchange rate on December 8th 2015, data in million CZK.             Source: Vaceková \& Prouzová, 2014.                 In general, the number of nonprofit organizations (NPOs) in the Czech Re-             public is increasing. The highest inter-annual growth (by 23.6%) was in 2009,","56                            Nonprofit organizations in selected CEE countries ...                when the number of NPOs exceeded 100,000. However, this number is not de-             finitive. It is simply the number of registered entities. Civic associations in the             Czech Republic are not required by law to be dissolved if they terminate their             activities. For this reason, the number of registered organizations that are actu-             ally inactive is unknown. The production and the gross added value increased             slightly in absolute figures over the whole studied period; however, in light of the             potential inactive organizations, it is not possible to determine the conversion             per unit. The share of NPOs in the GDP in the Czech Republic grew, increasing             from 1.45% in 2008 to 1.63% in 2011, as did the share in the employment rate,             showing a slight increase (from 1.71% to 1.96%) in the given period. Interest-             ingly, the number of volunteers (FTE) decreased over the studied period, which             can be perceived as an indicator of the impact of the financial crisis on donor-             ship, i.e. on donations of time.                In Slovakia, the development of the nonprofit sector is quite similar to the             Czech Republic. The number of NGO units is steadily increasing, but their pro-             duction and share of the GDP is rather small (table 20).               Table 20. Development of the nonprofit sector in Slovakia from 2009 to 2012                                Year                     2009    2010    2011    2012              Number of units                           51,943  54,088   56,206  58,158              Production (in million EUR)                  820     830     832     836              Gross added value (in million EUR)           460     480     556     593              NPO share in GDP (in %)                     0,81    0,80    0,89     0,91              Number of FTE employees                   24,453  25,600   28,205  44,036              Number of FTE volunteers                 272,909 304,094 223,804 306,854              Share in the employment rate (in %)        1.53%   1.58%   1.64%   2.51%              Revenues              Payments for market output (in million EUR)  620.4  609.1  612.43  651.17              Property income (in million EUR)            31.2    26.1    28.86   25.62              Other current transfers (in million EUR)   612.4   624.1   640.46  668.43              Voluntary work (in thousand EUR)          85,729  81,974   77,678 118,850             Source: Kuvíková, Stejskal \& Svidroňová, 2014                  Table 20 shows that the nonprofit sector has increased. By 1998, less than             ten years after the revolution, there were 23,142 nonprofit organizations in             Slovakia, of which 17,149 organizations were nongovernmental. In the next             ten years, this number more than doubled. The most up-to-date data are avail-             able for 2012 and prove the increase in the number of nonprofit organizations","Chapter 3: Importance and justification of private ...                 57                although some legal forms have decreased (subsidiary organizations and non-             investment funds). The most common legal form is that of a civic association             and their numbers are increasing (based on a conversation with a registrar in             the Evidence of Civic Associations in 2015, there are 20 applications for the             civic association registry per day).                Growth in the nonprofit sector in Slovakia can be monitored through em-             ployment in this sector. In 2012, according to the Statistical Office, 44,036 em-             ployees worked in NGOs and another 306,854 volunteers participated in non-             profit sector.                The problem with mapping the size of the nongovernmental nonprofit sec-             tor in Slovakia is that there is no satellite account for NGOs like the one in the             Czech Republic. The Statistical Office of Slovakia is aware of the satellite ac-             counts approach, but due to a lack of resources is not able to develop it further.             None of the research communities – academic, university, or nongovernmental             – focuses solely on mapping and researching civil society and the nonprofit sec-             tor. As a result, only superficial information is available on the numbers, struc-             ture, focus, types of activity, social contribution, economic strength, etc. On the             other hand, the Ministry of Interior as the registry office for nongovernmental             organizations keeps record on active NGOs (table 21).              Table 21. Comparison of registered and active NGOs in Slovakia in 2008 - 2012                   Type of NGO             Status         2008  2009  2010   2011  2012              Civic associations (CA) All registered    32,476 34,243 36,030 38,044 39,881                                 Active                 27,778 29,458 31,239 33,249 34,978                                 Share of active CA                                 on total number of CAs   86%   86%   87%   87%    88%              Foundations        All registered           807    835   870   900   930                                 Active                   328    349   384   414   433                                 Share of active foundations                                 on total number          41%   42%   44%   46%    47%                                 of foundations              Public benefit     All registered          1,861 2,081 2,310 2,499 2,685              organizations (PBO)  Active                 899 1,041 1,201 1,389 1,436                                 Share of active PBOs     48%   50%   52%   56%    53%                                 on total number of PBOs              Noninvestment      All registered           604    636   665   679   690              funds (NF)         Active                   476    506   533   547   548                                 Share of active NFs                                 on total number of NFs   79%   80%   80%   81%    79%             Source: prepared by the authors, based on data from the Ministry of Interior of Slovakia","58                            Nonprofit organizations in selected CEE countries ...                   The overview from table 21 compares the registered nongovernmental organ-             izations with those that are actually active, i.e. they have not announced starting             a process of liquidation or extinction. The least active registered organizations             are foundations (less than 50% of registered foundations are active throughout             the period).                Growth in the nonprofit sector in Slovakia can be also monitored through             employment in this sector. In 2010 according to the Statistical Office 20 938             employees worked in NGOs and other 269,714 volunteers participated which             converted to full-time employment to gives additional 7178 workers. For dif-             ferent part-time contracts 63 618 employees worked in nonprofit sector, we do             not have data separately for NGOs (for further characteristics of importance of             NGOs in Slovakia see e.g. Kuvíková - Raguseo, 2008).                Source data for Austria are the outcomes of the project „Different sources             of funding of nonprofit organizations” (Schober et al., 2010) conducted by Re-             search Centre NPO-Kompetenzzentrum WU Wien. In their primary research             conducted in 2010 they asked 266 Austrian NGOs and gained answers from 116             respondents.                The available data obtained by nationwide poll of NGOs in Austria in 2010             shows that the number of employees in this sector was about 170 113. Approxi-             mately 59 % of the employees work in the field of social and health services.             Another 55, 67 % workers are employed for part-time (Haider et al, 2010).                These figures only illustrate the nonprofit sector in Austria, to describe the             size of its real economic power we would have to research more complex macro-             economic indicators which is not the goal of presented text. In 2010 there were             266 respondents from Austrian NGOs that were selected from the database of             NPO Institute, containing ca. 4,000 NGOs. Questionnaire was completed by 116             NGOs, which corresponds to return at 43.6%. In Austria NGOs data have to be             collected from various sources since NGOs are not officially registered as such             and there is only a very limited access to the register of associations (Zentraler             Vereinsregister), the most common legal entity of NGOs. In terms of absence             of official data on NPOs in Austria, it is not possible to achieve absolute repre-             sentativeness of research sample. A significant proportion of participating NGOs             (28%) comes from Vienna and is active in the social field (social services) which             is typical for the Austrian nonprofit sector (figure 9).                Compared with data on revenue and employment (e.g. Heitzmann 2001, Sch-             neider - Haider, 2006) ICNPO classified NGOs are highly represented in social             services (43%), education (23%) and culture and art (18%). We can say that in             both countries significant sectors for NGOs activities are education, social ser-             vices, culture and sport.","Chapter 3: Importance and justification of private ...                 59                      Social services                                             43%                     Education                         23%                   Culture and art                18%                    Healthcare                15%                Development              and humanitarian aid       11%                 Sport and leisure      10%                 Interest activities   9%              Research and science  6%                   Environment   4%               Housing and labour  4%                        Others        7%                           0%    5%   10%   15%   20%  25%   30%   35%  40%   45%   50%             Figure 9. The core work of Austrian NGOs by ICNPO             Source: Schober et al, 2010.                  Another characteristic of Austrian NGO is a number of employees. Accord-             ing to the median in a single NGO works 21 paid employees and 5 unpaid vol-             untary co-workers. From this point of view we can say that Austrian NGO are             more professional: they have 45% of employees (figure 10).                                              Part-time                                          employees                                            16%                                                        Employees                                                         45%                                        Volunteers                                          39%                  Figure 10. Composition of the staff in the Austrian NGO             Source: Schober et al, 2010.","60                            Nonprofit organizations in selected CEE countries ...                   Other watched characteristics are summarized in table 22 (reflecting the out-             comes from scientific research of John Hopkins University in Baltimore and             insufficient statistical data for Austria, which had to be completed by secondary             data based on Schober, 2010).               Table 22. Comparison of selected characteristics in Slovakia and Austria                                            Slovakia    Slovakia    Austria    Austria                                           1995 - 1998   2011    1995 - 1998  2008 -2011              Population (in mil.)             5,3        5,4        7,9        8,5              GDP (in mil. EUR)              19 319     69 058,2  191 190,0   300 712,4              Number of NGOs                 17 149     42 122       n.a.     109 346              Field of core work (main 3 sectors)  n.a.   sport,     n.a.   social servic-                                                        culture,            es, education,                                                       education              culture              Share of NGOs on employment     0,9%       1,3%       4,5%        n.a.              Share of NGOs on GDP            1,4%       1,2%       3,0%        n.a.              Value added as % of GDP         0,5%      0,89%       2,5%        n.a.              Revenues from Public sector    22,1%      22,8%       47,3%       66%              Revenues from Private giving   23,7%      68,0%       5,7%       31,5%              Revenues from Self-financing   54,2%      23,1%       47,0%     29,14%              Volunteers (FTE in thousands)    7          7,9        41        3019              Share of employees within an NGO  n.a.    19,0%        n.a.      45,0%              Share of volunteers within an NGO  n.a.   50,0%        n.a.      39,0%             Source: Own elaboration using data of Statistical Office of the Slovak republic and data             of Statistical Office of Austria, 2011 completed by secondary data based on Schober, 2010                 Private nonprofit organizations play a very vital role in the economy of every             country. They are not only providers of special type of services that public sector             is not capable to provide in full quality and quantity and private sector is not             interested in providing these service, but they are also watch dogs of the society             and builders of active citizenship. Thus they have become an object of many             research studies. The divergence in their goals, size, roles, types of provided ser-             vices and ways of funding makes the NGOs an interesting object. Therefore we             chose as a subject for our study a comparison of the development and current             state of the Slovak, Czech and Austrian nonprofit sector in view of the histori-             cal development of these countries and consequently we want to evaluate the             funding and future trends of NGOs in the Czech Republic, Slovakia and Aus-             tria, which is content of the following chapters, depending on the level of our             research on NPOs in these countries.","ChapTeR 4                Current state of funding of nonprofit organizations                   Examining the funding of nonprofit organizations is an important issue, both             for nonprofit organizations and for the whole society. Nonprofit organizations             operate in a market economy and their activities require material, technical, and             financial security, which cannot be based merely on volunteering. The sustain-             able development of these organizations is impeded by financial problems that             are specific to them and their particular character.                4.1.  Funding sources of nonprofit organizations                 There are several classifications for resources funding nonprofit organiza-             tions. Based on a synthesis of theoretical knowledge (Gronbjerg, 1993; Kuvíko-             vá, 2004; Kuvíková \& Vaceková, 2009; Foster et al., 2009; Carrol \& Statter, 2009;             Kearns et al., 2014; etc.), and in order to achieve a general classification, we             considered the following to be sources of NGO funding:                • public sources;                • private and individual sources;                • self-financing (including business activities);                • foreign sources.                A particular source can be used in various forms, as shown in table 23.                The basic task of financing NGOs in order to fulfill their mission requires             continuous liquidity. The financial sources and amounts used to meet this task             vary; it is dependent on the NGO’s strategic management decisions. NGOs usu-             ally have a wider range of financing options than profit-oriented companies.","62                            Nonprofit organizations in selected CEE countries ...                Table 23. Funding sources of nonprofit organizations                          Funding sources                     Forms of funding              Funding from public sources         State and/or public contracts and subsidies                                                  Concluding contracts and agreements              Funding from private and individual sources  Foundation resources                                                  Donations from a business                                                  Donations from individuals              Self-financing                      Membership fees                                                  Sale of services (from the core work)                                                  Sale of products (from the core work)                                                  Use or rent of intangible assets                                                  Use or rent of tangible assets                                                  Appreciation of investments              Funding from foreign sources        European Union funds                                                  Direct subsidies             Source: Svidroňová \& Vaceková, 2012.                                                     Quasi equity                                       Non-profit incomes  Commercial incomes                From individuals                                                               From investing activities                       Private contributions                                                                   Rental                       Private foundations                                                                   Interest / dividend                       Membership fees                                                               Commercial Partnerships                       Remuneration for services                                                               Restructuring of capital                From companies                                                               Other Commercial Income                       Corporate contributions                       Corporate foundations                        Sponsorship                                                       No real economic exchange relationship               From public and government                        Subsidies                       Real economic exchange relationship                        Contracs               Transfers from other NPOs              Figure 11. Nonprofit incomes vs. commercial incomes             Source: prepared by the authors, based on data from Schober et al, 2010.","Chapter 4: Current state of funding of nonprofit organizations         63                   The main division of sources follows the microeconomic division on equity             and borrowed capital (figure 11). The concept of equity is problematic in many             NGOs, as they do not have any equity in the business or economic sense. Gen-             erally, there is a lack of investors who would provide capital in anticipation of             earnings. Classic features of equity are often undertaken by donors, providers             of subsidies, or members of the organization. To account for this aspect, we             use the term „quasi-equity” (Schober et al, 2010). Quasi-equity can be divided             into typical nonprofit incomes and standard commercial incomes. Under typical             nonprofit incomes, we include incomes primarily related to the main core work             and mission of an NGO; these incomes may come from a variety of funders.                Commercial incomes are incomes from activities unrelated to the mission of             an NGO. In particular, a commercial income is from investment activity or yield             of capital (e.g. income from renting its assets). Commercial incomes also apply             to the restructuring of assets, including the sale of assets and the associated ef-             fects of financing, such as sales of buildings and real estate. Other commercial             income is a residual category that includes all the commercial activities carried             out by NGOs that are not related to their mission and at the same time cannot             be assigned to any of the other commercial income categories (Michalski \&             Mercik, 2011; Wolak-Tuzimek, 2013).                One of conditions for the successful functioning of any organization is fi-             nance provision. The financial question of the existence of nonprofit organiza-             tions is connected with particularities which are derived from their service and             non-commercial status in society. Nonprofit organizations face harder forms             of competition than ever before, which inevitably requires the successful man-             agement of the difficult task of mastering and applying modern methods of             acquiring new financial sources in order to ensure the offer of public services in             a range that corresponds with society’s needs.                There are new ways to earn income that are a subject of increased popularity             among NGOs: self-financing and nonprofit commercialization.               4.2.  Self-financing of nonprofit organizations                 The organizations that are labeled as nonprofit have many names and there             are also a number of names for self-financing (Svidroňová \& Vaceková, 2012):             gainful occupation, economic activity, NGO enterprise, nonprofit business, in-             come from NGO activities, and community business. Self-financing is still not             a clearly defined term for NGOs. It is broadly defined as any diversification of the             funding sources of NGOs. From a narrower point of view, self-financing can be             understood as a business or any other economic activity of an NGO that gener-             ates income for itself, i.e. self-financing as a method of obtaining internal sources.","64                            Nonprofit organizations in selected CEE countries ...                   Self-financing activities bring financial income and potential profit but the             principle of the non-distribution constraint still applies. Unlike any commercial             company, the ways an NGO can use this profit is predetermined. Profitable NGO             activities, such as revenue from the sale or rental of assets or revenue from ad-             vertising, are subject to income tax. When taxing this type of income, it is nec-             essary to take into consideration several conditions that differ from country to             country. Usually the main activity, the so-called core work of the NGO, is either             not subject to taxation at all (Slovakia), or a given amount of profit from the core             work is exempt from tax and the profit above this amount is subject to taxation             (Czech Republic). In Austria, the law is even more complicated and the condi-             tions for tax exemption vary from region to region. Generally, tax exemption             is a sort of compensation for the non-distribution constraint. Weisbrod (1998)             pointed out that although NGOs cannot decide about the use of their profit, they             have tax exemption instead.                If an activity is not a core work activity or it complies with the definition of             business as stated by EU regulation, then it is another form of self-financing,             called a commercial activity. Self-financing activities are associated with the             entry of NGOs on the market, and they require business sector-style think-             ing, but they are not business/economic activities in the true sense of the word             (Svidroňová \& Vaceková, 2013).               4.2.1. Nonprofit self-financing in the Czech Republic, Slovakia, and Austria                The impulse for the research was a 1995 scientific project at John Hopkins             University in Baltimore (USA) comparing the nonprofit sectors of 22 countries,             including the Czech Republic, Slovakia, and Austria, in terms of the size and             power of various indicators.                NGOs have not yet reached a level of economic and managerial profession-             alism where it would be possible to exist solely on sources from self-financing             activities (membership fees, sales of services and products, the use of tangible             and intangible assets, and the use of investment appreciation). To reach such             a level is not usually the goal of an NGO, as it would contradict several princi-             ples of their financing (including multi-sourcing and the non-distribution con-             straint). We wanted to prove that self-financing may be in compliance with the             non-distribution constraint (Valentinov, 2008); e.g. it is a suitable method of             fundraising for NGOs. We explored whether and to what extent self-financing             had an effect on the non-distribution constraint.                The goal of the study was to identify the particular benefits and risks of NGO             self-financing based on relevant empirical findings from the Czech Republic, Slo-             vakia, and Austria. We presumed that despite the comparable size of the coun-             tries, as well as their shared past in the Austro-Hungarian monarchy, the influence","Chapter 4: Current state of funding of nonprofit organizations         65                of economic and non-economic factors led to different developments in NGOs             and their funding, including self-financing (Vaceková \& Svidroňová, 2014).                The study provided new insights and created an empirical basis for further             scientific study and research work in this field.                Primary data was obtained by the sociological method of a structured ques-             tionnaire. The data acquired in the Czech Republic in 2013 were part of the find-             ings of the Masaryk University project „CZ.1.07/2.3.00/30.0009 Employment             of Newly Graduated Doctors of Science for Scientific Excellence”. For Slovakia,             the data were the findings of primary research conducted in 2012 as part of the             dissertation „Self-financing and sustainability strategy of nonprofit organiza-             tions” (Svidroňová, 2012). Source data for Austria were the findings of the pro-             ject „Different sources of funding of nonprofit organizations” (Schober, 2010)             conducted in 2010 by the Competence Center for Nonprofit Organizations and             Social Entrepreneurship, WU Wien.                In order to achieve comparable findings, the same research steps were taken             (Benčo \& Vaceková, 2012):                • Selected relevant NGOs from a database or the Internet;                • Established personal contact with selected NGOs at the management level;                • Sent an e-mail to established contacts with a link to an online questionnaire;                • Sent a reminder two weeks after the link was sent.                Using the results from the research in the Czech Republic, Slovakia, and             Austria, we focused on NGO self-financing in terms of its benefits and risks.                Nonprofit organizations can be classified in terms of the founder or propri-             etor, as government (nonprofit state) and nongovernment (nonprofit private)             organizations, i.e. NGOs. We focused on the following types of NGOs in the             Czech Republic:                • civic associations (46% of respondents);                • foundations (6% of respondents);                • foundation funds (2% of respondents);                • public benefit organizations (21% of respondents);                • church or religious associations (25% of respondents).                We started the survey in the Czech Republic in 2013. We have just finished             the preliminary research phase, including pilot testing. Of the 250 NGOs sur-             veyed, we currently have answers from 67 respondents.                In Slovakia, the four main types of organizational-legal forms are very similar             to the Czech ones:                • civic associations;                • foundations;                • non-investment funds;                • organizations providing public benefit services.","66                            Nonprofit organizations in selected CEE countries ...                   Of the 670 surveyed NGOs, we obtained data from 182 respondents. The             sample structure is shown in table 24. It is the final number of respondents;             a Chi-square test proved the representativeness of our sample at the significance             level alpha of 0.05 (p-value of 0.129 > alpha):               Table 24. Surveyed NGOs and representativeness in Slovakia                            Legal form               Absolute number   Relative number              Civic association                            152             83.52%              Foundation                                    6               3.29%              Non-investment fund                           3               1.65%              Organization providing public benefit services  17            9.34%              Other (church associations, Red Cross, etc.)  4               2.20%              Total                                        182             100.00%              Source: Svidroňová \& Vaceková, 2012.                 In Austria (266 respondents), there were the following legal forms of NGOs:                • „Verein” (association);                • „Stiftung” (foundation);                • „gemeinnützige Kapitalgesellschaft” (public benefit organization);                • „Genossenschaft” (cooperative).                As in the Czech Republic and Slovakia, the most represented and therefore             the dominant legal form is the association.                The presented results are very detailed for Slovakia; in the Czech Republic             and Austria, the results are less complete and detailed. This is due to the differing             scopes of the surveys and the different sample sizes in the selected countries. The             surveys themselves were conducted in each country under specific circumstanc-             es, so the NGO samples are not comparable in terms of time and size; this was             not the aim of the surveys. We analyzed and interpreted the available primary             data in order to formulate several theoretical and practical solutions and recom-             mendations for NGO self-financing. We had data from two completed surveys             (Austria and Slovakia) and one preliminary survey from the Czech Republic.             Therefore, the analysis did not reach the same depths in the three selected coun-             tries; also, we did not try to interpret any statistical causalities and results that             would have compared the three different research samples. Such analysis was not             the scientific goal of the study, and it would have been irrelevant.                The study defines the benefits and risks of NGO self-financing, focused on             an empirical approach. It indicates the differences between NGO self-financing             and commercial/business activity. On the basis of relevant outcomes of primary             preliminary research in the Czech Republic, Slovakia, and Austria, we proved","Chapter 4: Current state of funding of nonprofit organizations         67                that self-financing is more than a business activity in the common market con-             ception. We also showed that self-financing may not be inconsistent with the             non-distribution constraint.                Table 25 shows the main sources used in NGO funding. The data was from             primary research in Slovakia (182 respondents) and Austria (266 respondents)             and from preliminary research in the Czech Republic (67 respondents).              Table 25. Sources of funding of NGOs in the Czech Republic, Slovakia, and Austria                                                                Czech               Type of funding        Source of funding       Republic  Slovakia  Austria              Quasi-equity:   State, state subsidies, municipal budgets  67%  42%  91%              nonprofit income  State/public contracts           *       4%      n/a                             Individual donors/companies       66%      60%      56%                             Grants (private foundations)      48%      45%      34%                             Assignations of 2% of tax income   n/a     92%      n/a                             Memberships fees                  24%      62%      51%                             Sale of own products and services  69%     58%      63%                             Sponsorship                        1%      n/a      53%                             Foreign sources, including EU grants   22%  13%     41%                             and subsidies              Quasi-equity:   Asset rental                     28%      15%      19%              commercial     Investment appreciation            3%       8%      21%              income                             Clearing of reserves               0%       0%      22%              Borrowed capital Bank loans                        *       0%      22%                             Pre-financing agreements           0%       0%      6%              Other          Other sources                      1%       8%      n/a             Source: Svidroňová \& Vaceková, 2012.                  In the Czech Republic, public funding was widespread, closely followed by             funding from individual donors and companies. However, sales of their own             products and services was the most significant source of funding. As other             sources, one respondent reported a fund-raising campaign, which could be             considered as a special way of raising funds from individuals and companies             for a specific purpose.                In Slovakia, other sources of funding were not further specified; therefore,             we cannot assign these points to nonprofit or commercial income. The structure             of funding was dominated by private and individual sources; self-financing and             public funding were also significant. Foreign sources were represented by for-","68                            Nonprofit organizations in selected CEE countries ...                eign foundations that supported Slovak NGOs; as such, they were considered to             be nonprofit income. None of the respondents reported bank loans or foreign             capital, supporting the fact that loans have not yet been established as a common             source of NGO income in Slovakia.                The funding sources in the Austrian NGOs corresponded to the presumed             model, i.e. public finance was clearly the most reported source. Other frequently             used sources were fees for services and products, donations from individuals,             sponsorship, and membership fees.                In all three countries, the nonprofit income as a part of quasi-equity pre-             vailed. Quasi-equity was essential for achieving the goal of the study. As table             25 shows, nonprofit income can be generated from self-financing activities that             are not necessarily of a commercial character, e.g. sales of own products and             services that are in compliance with the core work. The differences resulting             from the breakdown of incomes into nonprofit and commercial are indicated,             especially in the context of maintaining the non-distribution constraint princi-             ple of NGOs in the implementation of self-financing activities.               The Czech Republic                The data mapping the self-financing activities in the Czech Republic were             obtained during preliminary research conducted in the spring of 2013. The data             generally showed that self-financing is not a recent trend. Most respondents             (75 to 90%, depending on the age of the organization) chose some form of self-             financing in the early years of their existence. In general, 79% of the NGOs that             took part in the preliminary research raised funds through self-financing.                We asked the respondents to identify the problems (risks) connected to NGO             self-financing. They cited business risks, risks of conflict with the organization’s             mission, risks of organizational and professional unpreparedness, and the risk             of excessive dependence on only one financial source.                We interviewed respondents on self-financing as a commercial activity. In             general, most of the NGOs (approximately 75%) expressed the opinion that             it was not an activity distracting from the main mission; this confirmed the             assumption expressed in the section devoted to „quasi-equity” (i.e. nonprofit             incomes vs. commercial incomes).                To confirm the importance and benefits of NGO self-financing, we examined             the intention of respondents to use self-financing in the future: 98% answered             positively. The results of the preliminary research confirmed that even if the             total volume of other financial sources, especially public and private sources,             was greater in the majority of NGOs, self-financing activities were an absolutely             essential part of fundraising for most NGOs.","Chapter 4: Current state of funding of nonprofit organizations         69               Slovakia                 The results were obtained in the course of research about the funding of             NGOs in Slovakia (Svidroňová \& Vaceková, 2012). Self-financing was used by             87.4% of NGOs in Slovakia. The least-used funding sources were state/public             contracts (only 2.20%). This suggested that there still were not suitable condi-             tions for NGOs to provide public services. This makes it necessary to search for             other sources; private funding as represented by grants was at a higher rate, as             were membership fees. Self-financing within one organization was reported by             25.4%, which is higher than the estimation presented as an „ideal” diversifica-             tion of funding sources (Kuvíková \& Vaceková, 2009). Although this represents             a quarter of the total sources of an NGO, the value of 25.4% is still lower than             the European average of 36.9% (Vaceková \& Svidroňová, 2014).                For Slovakia, there was evidence that even newer NGOs use self-financing             (table 26):               Table 26. Use of self-financing according to the age of NGOs in Slovakia                  Length of existence  up to 5 years 6 to 10 years 11 to 20 years more than 20 years              Length of use of self-financing              we do not use self-financing  7         2          12            2              1 year                       13         2          1             1              2 to 5 years                 32         11         9             1              more than 5 years            –          26         37            26             Source: Svidroňová \& Vaceková, 2012.                  As table 26 shows, organizations less than five years old also use self-financ-             ing. For example, 13 organizations younger than five years used self-financing             for one year, and 32 such organizations applied self-financing activities for two             to five years. Young organizations therefore also recognized the need to diversify             sources and they used self-financing in order to gain financial stability.                To evaluate the impact of self-financing on the non-distribution constraint of             NGOs, we explored whether respondents considered that self-financing activities             detracted attention from the mission and core work of the organization. Of the             respondents, 68% stated that self-financing was not a distraction from the mis-             sion. More than 21% of them said that it was not a distraction, but they had some             objections to self-financing (e.g. NGOs should not develop business activities), or             they were unable to decide because they said it depended on other factors, such             as the legal form of an NGO. Less than 11% of organizations believed that self-             financing was a commercial activity that distracted from the mission and core             work of NGOs. We concluded that NGOs must be able to distinguish between","70                            Nonprofit organizations in selected CEE countries ...                a commercial activity and an activity that requires a business-like way of think-             ing and focus on self-financing in compliance with the mission and core work.               Austria                The Austrian NGOs surveyed had very strong state support and the use of             public funding was very significant. The most used source of funding in the             Austrian NGOs was public sources, used by 91% of respondents (Schober et.             al., 2010). This involves long-term contractual relationships which greatly in-             fluence the acquisition of new sources of funding. The question of how much             effort NGOs have to put in to keep these sources whilst obtaining new financial             sources and fulfilling their missions comes to the fore. The need to fulfill the             mission and keep the non-distribution constraint must be a priority when con-             ducting any activity that brings money in for NGOs.                A partial aspect of this issue also includes an earmarked purpose for sources             and accountability to the source provider. Compared with other sources of fund-             ing, the highest effort must be made by NGOs when applying for EU funds, state             funds, and contributions and donations from companies and individuals. This             explains the research results, which showed the clear desire of NGOs to gain             a larger part of their funds through their own activities. It also confirms the             importance of self-financing, which can offer the highest level of independence             and freedom in the decision-making process.                The importance and benefits of self-financing are supported with the findings             from the Austrian research on NGO funding focused on the freedom of use of             financial sources. The highest purpose-fixed sources provided the least freedom             to decide about the use of these sources in fulfilling the mission. The highest             level of influence of a source provider was observed in contractual support from             the state and the EU (the source provider strictly controls the use of provided             money). The least influence and control was in the income from financial invest-             ments and renting assets, which are self-financing activities. Self-financing had             a positive effect on achieving the generally beneficial purposes for which NGOs             were founded and can be in compliance with non-distribution constraint.               4.2.2. Benefits and risks of self-financing                It is strategically advantageous for NGOs to focus on self-financing activities             that are in accordance with the core work of the NGOs and their missions. From             a narrow point of view, self-financing is raising funds from sources defined in             the „quasi-equity” section as „nonprofit income”. The benefits and risks of self-             financing can be defined as follows:","Chapter 4: Current state of funding of nonprofit organizations         71                1 .  Benefits:                   – Increased income; an additional source of funding;                   – Increased diversification of funding increases NGO sustainability;                   – Increased flexibility (income raised by self-financing is not limited by                  donor conditions);                   – Improved strategic and long-term planning;                   – Improved financial management and discipline;                   – Positive impression on donors (NGO is able to co-finance a project with                  its own funds);                   – Empowered board of advisors using their business and managerial skills                  for self-financing;                   – Broadened portfolio of products and/or services, thus broadening the cli-                  ent base;                   – Increased NGO self-confidence after successful use of self-financing                  activities.             2 .  Risks:                   – Divergence of organizational sources;                   – Focusing on business and not on the mission of NGO;                   – Profit reinvested into profitable activity, rather than into core work;                   – Loss or debt;                   – Loss or damage of NGO reputation;                   – Changed motivations of employees and in demands on staff;                   – Competitive environment of the commercial sector (with self-financing,                  NGO enters the commercial market);                   – Distribution of products and services (NGOs have limited capacity for                  servicing the market);                   – Problem with servicing large target group (in situations of growth).                  (Svidroňová \& Vaceková, 2013)                The experience of NGOs in all three countries clearly indicated the need to             use forms of self-financing in the interest of stability, although this should not             be the only way or sole source of income. When raising funds using the dem-             onstrated forms of self-financing, NGOs must reckon with certain risks. These             are more numerous, larger, and more challenging than those to which profitable             companies are exposed. For each form of self-financing, there is a rule that the             further the organization diverges from its mission, the greater the risk it takes             if the plan is unsuccessful.                The entry of NGOs on the standard market (with profitable businesses) has             created some problems, shown together with the calculation of statistical vari-             ables reflecting their importance in table 27 below (scalability assessment: 1 =             very serious problem, 2 = serious problem, 3 = minor problem, 4 = slight prob-","72                            Nonprofit organizations in selected CEE countries ...                lem, 5 = I cannot judge), and symbols a) to e) refer to problems. The description             of the problems is in the text below table 27:             a)  „vulnerability” of the NGO if the organization relies on one-sided fund-                ing depending on the success of its market activities or other forms of self-                financing (average importance 1.81 ± 1.143),             b) the potential risk that the organization „forgets” its mission and that making                a profit becomes a priority (average importance 2.11 ± 1.229),             c)  strong competition from the private sector (average importance 2.34 ± 1.187),             d) the organization may overestimate its ability and capacity to implement and                develop self-financing activities (average importance 2.44 ± 1.168),             e)  among other issues: limited legal options for self-financing; high risk of abus-                ing the self-financing possibilities; legislative barriers that do not allow any                (or very few) business activities to certain types of nonprofit organizations                (e.g. foundations); unclear explanation of the rules on the funding of NGOs;                lack of capital and knowledge; lack of „a culture of support for the nonprofit                sector” in the form of purchasing its products and services (Vaceková, 2009).               Table 27. Problems connected with funding NGOs through self-financing               Indicator / Problem   a)         b)         c)          d)        e)              Mean                  1.81       2.11        2.34       2.44      0.21              Median                2.00       2.00        2.00       2.00      0.00              Standard deviation   1.143       1.229      1.187      1.168      0.577              Minimum                0          0           0          0          0              Maximum                4          4           4          4          3             Source: Vaceková, 2009.                  We tested these problems, especially the problem in point b) distracting from             the mission, which was reported in 2009 and 2012 in the Slovak NGOs, and in             the Czech NGOs in 2013. Although we cannot provide the current statistical             calculation the same way as in table 24 due to a change in the response scale             (in 2009, a 1 to 5 scale was used; in later surveys, respondents answered a yes/             no/other option), we can conclude that while the problem of the potential risk             that the organization „forgets” its mission and that making a profit takes first             place was considered serious (importance 2.11); in research in 2009, it had lost             importance. The vast majority of respondents now think that self-financing does             not distract from the core work and mission fulfillment: in Slovakia, 86% of             respondents thought that self-financing did not distract from the mission and             core work, 11% of NGOs thought that it did, 3% of the respondents (4 NGOs)             stated that it depended on other factors, e.g. the legal type of NGO using the","Chapter 4: Current state of funding of nonprofit organizations         73                self-financing. In the Czech Republic, the preliminary research showed similar             results: 81% of the respondents claimed that self-financing did not distract from             the mission and core work, and that in fact, the mission and core work of NPOs             were supported by self-financing; 13% of NGOs thought that self-financing was             a purely commercial activity, and 6% of respondents could not decide. These             results were obtained during preliminary research; they will be expanded in up-             coming primary research. Despite the problems associated with self-financing,             this method of funding is currently viewed as one path to financial stability and             independence for NGOs. Independence is understood not only from the point             of view of its financial aspects. It is also independence from the environment             where the NGO is and independence when the organization needs to decide the             direction of its activities. This independence is directly connected with financial             independence.                By exploring the self-financing activities of NGOs in three different countries             we tried to bring some empirical evidence showing that the commercial activi-             ties of nonprofit organizations must be understood in a broader context than             that of a „business” and that the commercialization of NGOs can be in compli-             ance with the non-distribution constraint.                Therefore, the goal of the research was to identify particular benefits and             risks of NGO self-financing based on relevant empirical findings from the Czech             Republic, Slovakia, and Austria. We fulfilled this goal by presenting the partial             results of primary research; we confirmed that self-financing is a suitable meth-             od for raising funds and also a ways to gain financial stability, independence             and, in the end, long-term sustainability for NGOs.                In the subchapter, we showed that NGO self-financing can be connected to             their core work and does not have to be in conflict with the non-distribution             constraint. The fulfillment of the NGO mission supported by commercial ac-             tivities in accordance with the established core work can be considered an ap-             propriate method to achieve financial independence and stability which should             be undertaken by NGOs. We can conclude that the benefits of self-financing             prevail over its risks. The scope of the survey that we introduced here, could be             a suitable basis and a starting point for further scientific activities in the field of             the commercialization of NGOs.               4.3.  Commercialization of nonprofit organizations                 Over the last few decades, the increase in external environmental challenges             faced by NPOs has attracted the attention of researchers, and the commerciali-             zation of NPOs became a prominent issue in modern multidisciplinary stud-             ies. Researchers dealing with the topic of NPO commercialization have argued","74                            Nonprofit organizations in selected CEE countries ...                that NPOs must assume entrepreneurial postures in their operations (Sharir \&             Lerner, 2006; Weerawardena, McDonald \& Sullivan Mort, 2010), adopt innova-             tive practices (Jaskyte, 2004; McDonald, 2007; Weerawardena \& Sullivan Mort,             2006), focus on outcomes targeted by government policy, and pursue innova-             tive means of delivering superior value to the target market in order to capture             a competitive advantage (Weerawardena, McDonald \& Sullivan Mort, 2010).                Some researchers have claimed that NPOs should become more market ori-             ented (Nicholls \& Cho, 2006) in order to manage the increased competition.             Although the application of market principles to NPOs is hardly new, the con-             cept has been expressed in diverse terminology (LeRoux, 2005). Salamon (1993)             called it the „marketization of welfare”; Weisbrod (1988) termed the increasing             tendency of nonprofits to develop new enterprises, charge fees, and produce             goods for sale as the „commercialization” of the sector.                The term „marketization” is used to refer to nonprofits becoming „more mar-             ket driven, client driven, self-sufficient, commercial, or businesslike” (McKay et             al, 2011). Marketization has thus a broader meaning than nonprofit commer-             cialization, which is described as „a process in which NPOs are geared toward             sales revenues rather than donations or government grants” (Weisbrod, 2004).             There are two paths to commercialization (Enjolras, 2002): it may occur as the             result of the development of commercial activities to finance the production of             mission-related output or as the result of a transformation of the relationship             between the organization and its members from participation to consumption.             The narrow definition is that commercialization of nonprofits occurs when these             organizations „decide to produce goods and services with the explicit intent of             earning a profit” (Tuckmann, 2000).                The economic determinants and effects of nonprofit commercialization have             been the subject of wide-ranging theorizing and research, a significant por-             tion of which raises critical concerns about the effects of commercialization on             the ability of nonprofits to achieve their missions. According to some authors,             commercialization converts nonprofits into „for-profits-in-disguise” (Weisbrod,             2004), puts civil society at risk (Eikenberry \& Kluver, 2004), results in mission             deflection (Minkoff \& Powell, 2006), and brings about mission-market tensions             (Young, 2003).                Opponents of NPO commercialization (Weisbrod, 2004; Eikenberry \& Klu-             ver, 2004; Minkoff \& Powell, 2006; Young, 2002) generally agree that while it is             often driven by good social and financial intentions (Guo, 2006), it can involve             tremendous complicity and controversy due to the contradiction between the             moral adherence to social goals and the increasing engagement in profit seeking             (Weisbrod, 2004; Phills \& Chang, 2005).                In contrast, supporters of commercialization (Brinckerhoff, 2000; Salamon,             2002; Valentinov, 2008) suggest that it is a promising way for NPOs to achieve","Chapter 4: Current state of funding of nonprofit organizations         75                self-sufficiency. Moeller and Valentinov (2012) state that „many NPOs are lo-             cated in hostile environments and face highly insecure prospects for survival”.             Thus, „commercial activities provide a self-regulatory mechanism that enables,             rather than hinders, NPOs to perform their missions in environments where the             supply of critical resources is insecure” (Moeller \& Valentinov, 2012).                Both sides have undoubtedly recognized the growing significance of the en-             trepreneurial activities of NPOs; however, it is still unknown whether these             activities are rooted in different sets of motivations and how they affect NPO             missions, funding streams, and service delivery.                The entrepreneurial motivation of NPOs is characterized by specific features             derived from the non-commercial status of these organizations in society. Histori-             cally, the bottom-line focus on the mission rather than on entrepreneurial activi-             ties has been a defining feature of NPOs (LeRoux, 2005). A review of the literature             revealed the lack of a well-developed discussion of entrepreneurial motivations             and the effects of the non-distribution constraint principle on those motivations.                Knowledge about how entrepreneurial motivations could affect NPOs and             how the non-distribution constraint affects these motivations are equally im-             portant in theory and practice. According to Salamon and Anheier (1992), the             non-distribution constraint is a key feature of NPOs. The trustworthiness the-             ory argues that the non-distribution constraint weakens the incentives of non-             profit entrepreneurs to maximize profits at the consumer’s expense. In fact, the             non-distribution constraint has „only a weak effect on entrepreneurial choice”             (Brhlikova \& Ortmann, 2006) as shown by the model of entrepreneurial choice             proposed by Glaeser and Shleifer (2001). Revisiting specific economic theories             of NPOs (the public goods theory, the consumer control theory, the trustwor-             thiness theory, and the supply side theory) is helpful for understanding why             „individuals prefer to satisfy some of their consumption preferences through             involvement in NPOs” (Valentinov, 2008) rather than through regular exchange             transactions in the marketplace.                A lack of strong empirical support has led some economists to contest these             theories. Although case studies of nonprofit entrepreneurship abound (Young,             1985), there are fewer quantitative studies that examine the circumstances be-             hind the entrepreneurial motivations of NPOs. The existing evidence seems to             suggest that NPOs do not have a priori motivations for entrepreneurship, but             rather adopt these activities as „a coping strategy when financial circumstances             threaten to limit the scope of their service provision” (LeRoux, 2005).                According to the resource dependency theory, nonprofits use commercial             income as a replacement for lost government grants and private revenue (Crim-             mins \& Keil, 1983; Eikenberry \& Kluver, 2004; Young, 2003; McKay et al, 2011).             Drawing on this theory, Eikenberry and Kluver (2004) maintained that when             public and private supporters falter, one strategy that NPOs pursue is the use of","76                            Nonprofit organizations in selected CEE countries ...                market approaches to generate revenue. However, nonprofit scholars have pro-             vided little empirical evidence for or against this thesis. Kerlin \& Pollak (2011),             favoring institutional theory, showed that there was little evidence that the in-             crease in commercial revenues between 1982 and 2002 was associated with de-             clines in government grants and private contributions. Other nonprofit literature             has also favored the institutional theory (Meyer \& Rowan, 1977; Scott, 1995).             This perspective suggests that the survival of an NPO requires conforming to the             institutional environment in which it exists (Kerlin \& Pollak, 2011).                The increase in commercial activities in the nonprofit sector raises the ques-             tion of whether NPOs are merely „for-profits-in-disguise” (Weisbrod, 1988;             Weisbrod, 2000; Weisbrod, 2004). These „false” nonprofits may maximize prof-             its that they then „distribute in disguised form (as higher wages and perks), or             they may maximize revenues that lead to power and prestige for their managers.             They are lured into the nonprofit sector by the tax and subsidy advantages that             they gain therefrom” (James, 2000). Another interesting phenomenon here is the             „false commercialization” that occurs when NPOs carry out commercial activi-             ties with the sole and explicit aim of covering the costs of fulfilling the nonprofit             mission for which they were founded.                Generally, even if the relevance of the issue remains high on international             research agendas (Weisbrod, 2000; Weisbrod, 2004; Salamon \& Anheier, 1992;             Guo, 2006; Enjolras, 2002), empirical research in the area remains scarce be-             cause of the lack of relevant data (Guo, 2006). Salamon examined the extent             to which the nonprofit social service sector was commercialized, estimating             that the income that NPOs received from entrepreneurial activities increased             by more than 600% between 1977 and 1996 (Salamon, 2002). However, there             have been few or no detailed empirical analyses on the motivations or particular             effects of NPO commercialization. There have been attempts to provide empiri-             cal findings to illuminate the issue. One attempt was made in 2000, when the             Pew Charitable Trusts commissioned two authors to survey the landscape of             enterprise in the nonprofit sector (Massarsky \& Beinhacker, 2002). Respondents             were asked to comment on whether they viewed their organizations as entre-             preneurial, and if so, what entrepreneurial strategies they were using. They were             also asked about their reasons for initiating business ventures. The research out-             comes showed that financial return is not the only entrepreneurial motivation             for NPOs. Of the respondents operating business ventures, 39% said that their             entrepreneurial activities also served their constituents by providing employ-             ment, training, and therapeutic opportunities; 34% claimed that the ventures             generated positive community relations; and 23% said the ventures helped to             revitalize the neighborhood and community (Massarsky \& Beinhacker, 2002).             However, no rigorous empirical analysis on the relation between the commercial             activities and other attributes of NPOs was provided.","Chapter 4: Current state of funding of nonprofit organizations         77                   The relevance of the issue has been recognized in (post-)transitional coun-             tries, where NPO resources have become a noticeable concern (Pospíšil et al,             2012; Svidroňová \& Vaceková, 2012; Svidroňová \& Vaceková, 2013; Vaceková,             2014). Preliminary empirical data mapping the self-financing and commercial             activities of NPOs were collected in the Czech Republic and Slovakia (Vace-             ková, 2014). The data generally reveal that nonprofit commercialization is not             a recent trend. Over 75% of Czech and 87% of Slovak NPOs used some form of             self-financing activities, including commercial ones, even in the early years of             their existence, confirming the importance and benefits of the entrepreneurial             activities of NPOs. Over 75% of Czech and 89% of Slovak NPO representatives             expressed the opinion that self-financing is not an activity that distracts from             the main mission.               4.3.1. Data on nonprofit commercialization in the Czech Republic                In the Czech Republic there is no publicly available database with individual             data about NPOs and their resources that would enable a detailed analysis of             the economic (market) behavior of NPOs to be worked out with representative             outcomes. We can get a basic idea of the development of individual types of             revenues in the Czech Republic, including nonprofit commercial revenues, from             the internationally comparable and publicly available data from Czech Statistical             Office (CSO) issued by the Satellite Account of NPOs (SANI) for NPOs in all             institutional sectors of the national economy (CSO 2013a) for the period from             2005 to 2011. The Czech Republic is one of the few countries that also draws up             a satellite account for NPOs as a part of their national accounting.                The internationally comparable and publicly available data from the Annual             National Accounts (ANA) for NPOs serving households (CSO, 2013b) for 1995             to 2012 is also a potential source of information. In addition to the 17-year time             series, the ANA monitors and presents NPOs serving households separately from             the households themselves, which is a practice that not many European countries             yet follow; however, this source is not suitable for our purposes because the na-             tional economy is classified according to institutional sectors. The institutional             sector of NPOs serving households contains data only on the NPOs that are             non-market producers, i.e. they cover less than 50% of their operational costs             (production and services) from their own revenues. The entities that cover more             than 50% of their operational costs from their own revenues may be followed             in SANI only under the institutional sectors of non-financial businesses and fi-             nancial institutions. It is not even possible to provide a qualified opinion on the             commercialization of NPOs serving households as a part of the nonprofit sec-             tor because of the 50% criterion. If any entity exceeded the 50% criterion in the             course of time, it would be included in another institutional sector without the","78                            Nonprofit organizations in selected CEE countries ...                ANA time series user obtaining any information on the reclassification of the en-             tity itself or the scope of the impact on the structure and size of the NPO funding             sources. Hence, it would be improper in terms of methodology to come to any             conclusions on the commercialization of NPOs on the basis of data from ANA.                We worked especially with data from CSO that were collected as part of an             annual statistical survey of NPOs carried out with the NI 1-01 (a) questionnaire             for the purpose of developing SANI and ANA. The data were not presented pub-             licly anywhere and they were available in their aggregate form only by specific             request, a request which we made for the purposes of this research.                We worked with three selected typical groups of NPOs, regardless of the             institutional sector to which they belong:             1)  foundation entities, represented by organizations with the legal form of                a foundation or an endowment fund in the Czech Republic;             2)  civic associations, represented by organizations with the legal form of an as-                sociation and its organizational unit;             3)  nonprofit providers of public services, represented by organizations with the                legal form of a public benefit organization in the Czech Republic.                These are three major groups of NPOs in the Czech Republic that vary in             terms of their resources. We divided each of the studied groups into large enti-             ties and small entities according to the methodology used for the data collection             by means of the NI 1-01 (a) questionnaire in the Czech Republic. Large NPOs             are NPOs employing more than nine natural persons. These entities are annu-             ally surveyed in the form of a census by means of the NI 1-01 (a) questionnaire.                SANI has provided data for all NPOs in a time series since 2005, when NPOs             employing more than nineteen natural persons were considered to be large             NPOs. A change was introduced in the methodology of data collection in 2008,             whereby NPOs employing more than nine natural persons were considered to             be large. For this reason, we used only the data for the time series from 2008 to             2012, for which we have representative data for large NPOs in a five-year time             series that are exact, comparable in time, and complete (see figures 12–14).                The presented results indicate that nonprofit commercial revenues were not             an important funding source for Czech NPOs, not even during the financial             crisis. A legislative change directly influencing the commercialization of Czech             NPOs was included in the new Civil Code, valid since January 1st 2014. It ena-             bles the development of entrepreneurial activities and may produce a consider-             able change in the structure of revenues. Thus we can expect growth in nonprofit             commercial revenues in the Czech nonprofit sector.","Chapter 4: Current state of funding of nonprofit organizations         79                                                                              12,4 12,5                                     2008  2009  2010  2011  2012         11,4                                                                           6,0  6,3                                                                 4,9  5,2                                    4,6                        4,4                                  4,2                            3,5 3,5  3,7                                        3,9                                                                                  2,9                   2,4 2,3 2,3                         1,8                 1,3                      1,3 1,2 1,0  1,3  1,2                                        0,9            1,0  0,8 0,8                                                   0,6                  Commercial  Noncommercial  Contributions  Membership dues Operating subsidies  Other revenues                revenues form own revenues form own and gifts received  received                products, servicies products, servicies                 and merchandise  and merchandise             Figure 12. The structure of resources of large civic associations from 2008 to 2012                       per unit (data in Mio.CZK, 1 Euro = ca. 27 CZK)             Source: Based on specifically requested CSO data from the annual statistical survey of             NPOs using the NI 1-01 (a) questionnaire (c.f. Vaceková \& Prouzová, 2014).                                         2008  2009  2010  2011  2012                                  7,0  7,0 6,9            7,0 7,1 7,1 7,0 7,0                                     6,6                                6,2                                                                                  2,3 2,3  2,5                                                                       1,9 2,0                            1,3                   1,2 1,2 1,1 1,0                                             0,7 0,8 0,7  0,9 0,9                      Commercial  Noncommercial  Contributions  Operating subsidies  Other revenues                      revenues     revenues   and gifts received                   form own products,  form own products,                      servicies    servicies                    and merchandise  and merchandise             Figure 13. The structure of resources of large nonprofit providers of public services                       from 2008 to 2012 per unit (data in Mio.CZK, 1 Euro = ca. 27 CZK)             Source: Based on specifically requested CSO data from the annual statistical survey of             NPOs using the NI 1-01 (a) questionnaire (c.f. Vaceková \& Prouzová, 2014).","80                            Nonprofit organizations in selected CEE countries ...                                                                            29,1                                    2008  2009  2010  2011  2012                   28,0                                                                            25,4                                                                        19,7                                                                               17,4                    9,0                   7,0            6,5       6,6                      5,8  5,5                             4,5                                     3,5                                               2,2  1,9                                        1,0               0,9  0,7  0,8                                                       0,1              Revenues form own products,  Contributions  Operating subsidies  Other revenues               servicies and merchandise  and gifts received             Figure 14. The structure of resources of large foundations from 2008 to 2012 per unit             Source: Based on specifically requested CSO data from the annual statistical survey of             NPOs using the NI 1-01 (a) questionnaire (c.f. Vaceková \& Prouzová, 2014).                 To provide a more complete overall picture of the utilization of nonprofit             commercial revenues at foundation entities, civic associations, and nonprofit             providers of public services, we also present the data for small NPOs. Small             NPOs are NPOs employing nine or fewer natural persons or even having no             paid employees. Small NPOs are surveyed in the form of a census or a very             extensive selective survey carried out using the NI 1-01 (a) questionnaire once             every five years when a certain legal form of units is selected for such a survey             in the given year. For example, in 2008, generally beneficial companies were             surveyed in the form of census; in 2009, foundations and endowment funds; in             2010, professional organizations/chambers, other chambers, associations of legal             persons, and hunting communities; in 2011, church organisation, political par-             ties, and political movements; and in 2012, associations and their organizational             component were surveyed in the form of a very extensive selection procedure.             For this reason, we are unable to work with a time series or to contribute to the             discussion on the development of nonprofit commercial revenues at small NPOs             before the five-year cycle repeats. As regards small NPOs, we present only the             situation in the selected years for which we were able to obtain accurate and             complete data.","Chapter 4: Current state of funding of nonprofit organizations         81                   The development of total revenues for small civic associations (employing             nine or fewer natural persons) could not be studied due to the data collection             methodology. In 2012, they amounted to 0.2 mil. CZK (approximately 7,400             Euro) per unit. In contrast to large civic associations, the most important in-             come resources were received operational subsidies (600,000 CZK / approxi-             mately 22,200 Euro per unit), accounting for 32% of the total revenues. Rev-             enues from their own products, services, and merchandise, of which more than             half were non-commercial revenues, achieved the same level.                The development of total revenues for small nonprofit providers of public             services could not be studied due to the data collection methodology. In 2008,             they amounted to 1.5 mil. CZK (55,500 Euro) per unit. As with large nonprofit             providers of public services, the most important funding resources (accounting             for more than 40% of the total revenues) were commercial and non-commercial             revenues from their own products, services, and merchandise, of which 80% were             non-commercial. Another important funding resource were operating subsidies.                As regards small foundation entities, the development of revenues cannot be             studied in light of the methodology of data collection. In 2009, they amounted             to 1.9 mil. CZK (70,400 Euro) per unit. The most significant revenue resource             continued to be property incomes and other revenues; their share in the rev-             enues for 2009 was 56.3%; the assets of small foundation entities were up to 1.07             mil. CZK (40,000 Euro) per unit due to the high number of foundation entities             that received contributions from the Foundation Investment Fund falling under             this category. Small foundation entities studied in 2009 showed a 10.5% share             of the revenues that were almost completely non-commercial revenues from             their own products, services, and merchandise, corresponding to the findings             on large foundation entities. We found a considerable difference in contributions             and gifts, where this funding resource amounted to a 31.6% share of the total             revenues of small foundation entities; we recorded a decrease to 3% in the large             foundation entities.              4.3.2. Data on nonprofit commercialization in Slovakia                 In this subchapter, we examine the commercial activities of nonprofits in             Slovakia on the basis of data from several sources and databases: the Slovak             Statistical Office, the Ministry of Interior of Slovakia, the Slovstat database, the             Financial Directorate of Slovakia, and tax offices. To obtain the data was quite             difficult because the Slovak Statistical Office does not follow the activities of             NGOs separately in terms of their main and business (commercial) activities.             Likewise, the Ministry of Interior of Slovakia and its Department of Internal             Affairs and the Department for Business do not have information about the             number of nonprofits which undertake any business activities. The Ministry of","82                            Nonprofit organizations in selected CEE countries ...                Interior is merely a registry office for certain types of legal forms of NGOs; it             does not keep a record of NGO activities. The obtained data were collected from             several sources used to map out the commercialization of nonprofit organiza-             tions in Slovakia. Given that some data was not comprehensively recorded in             any of the mentioned offices and there were no official statistics or records on             NGOs engaged in commercial activities, this review is incomplete.                For each nonprofit organization that decides to fulfill its stated mission, the             necessary resources must be obtained. Income from its own activities, whether             main (self-financing) or business (commercial), is increasingly important due             to the changing structure of various foreign funding sources and insufficiently             developed domestic donations from individuals and companies in Slovakia. Ta-             ble 28 shows the income of nonprofit organizations serving households between             2008 and 2013; this reflects revenues from the sales of their own products and             services, including income from business activities, and nonprofit organization             total revenues in euros.               Table 28. Income of nonprofit organizations for 2008-2013                       Income from sales                             Income from sales of               Year   of own products and   Total costs  Total revenue  own products as a per-                           services                                centage of total revenues              2008        242,299,000     838,594,000  879,933,000        27.54%              2009        237,476,390     876,764,732  915,754,499        25.93%              2010        202,576,395     895,668,206  928,773,845        21.81%              2011        212,842,024     818,565,140  871,322,914        24.43%              2012        183,592,440     898,757,171  944,564,412        19.44%              2013        208,237,981     950,563,820  984,441,377        21.15%             Source: prepared by the authors, based on internal data of the Slovak Statistical Office, 2015.                  As can be seen from table 28, the income for nonprofit organizations from the             sales of their own products and services is neither increasing nor decreasing. In             2008, this income totaled nearly €243 million; in 2010 it decreased by €39,722,605.             In 2011, revenues again rose to the level of €212,842,041; in 2012, there was a de-             crease of €29,249,584. In 2013, the amount increased again to €208,237,981. The             total revenue development had a sinusoidal character. The highest total revenue             was in 2013, at the level of €984,441,377. Paradoxically, while in 2008, the amount             of income from sales of their own products and services was the highest, the total             revenue for the organizations was the second lowest in the observed period.                The income from sales of their own products and services as a share of the             total revenues of nonprofit organizations shows what percentage of the total","Chapter 4: Current state of funding of nonprofit organizations         83                revenue was created by the income from business activities. Nonprofit organiza-             tions achieved the maximum income from business activities in 2008 (27.54%).             By 2010, this decreased to 21.81%. In 2011, there was an increase by 2.62%. In             2012, the income from business activity was the lowest (19.44%). In 2013, there             was a renewed increase to 21.15%.                Table 29 shows the number of tax returns filed for nonprofit business activi-             ties in Slovakia, i.e. the number of nonprofit organizations that undertook any             business activity that was subject to taxation.               Table 29. Number of nonprofit organizations expressed in number of tax returns from                      business activity                         Number of tax returns   Total number of nonprofit   NGOs with commercial                Year   from business activities  organizations    activities as a percentage of                                                                  the total number of NGOs              2008            1,081                 39,874                2.71%              2009            1,199                 42,395                2.83%              2010            1,388                 44,176                3.14%              2011            1,487                 46,273                3.21%              2012            1,573                 45,480                3.46%              2013            1,653                 49,101                3.37%             Source: prepared by the authors, based on internal data of the Financial Directorate of             Slovakia, 2015.                 Every year, an increasing number of tax returns are filed for the business             activites of nonprofits; an average of about 114 more tax returns per year. The             average growth in nonprofit organizations using commercialization is 0.13% per             annum. This can be considered as proof that nonprofit organizations use com-             mercialization more and more to generate revenues, but the percentage share             says that this form is still underdeveloped in Slovakia.                Table 30 displays business revenues including operating, financial, and extra             income for the period between 2008 and 2013. In 2008, the income from busi-             ness was €194,833; by 2013, it had decreased by €136,427, despite the annually             increasing number of tax returns and the increasing number of nonprofit or-             ganizations doing business. In 2011, the nonprofits had revenues of €58,738; in             2012, their amount increased by €8,506. In 2013, there was a drop to €40,322.             This decline may have been due to a slight decrease associated with nonprofits             doing business in 2013 accompanied by a steady increase in the total number of             nonprofits in Slovakia.","84                            Nonprofit organizations in selected CEE countries ...                Table 30. Business revenues of nonprofit organizations in thousands €                         Year                           Business revenues                 2008                                      194,833.53                 2009                                       93,959.71                 2010                                       58,405.77                 2011                                       58,738.48                 2012                                       67,245.15                 2013                                       40,322.65             Source: prepared by the authors, based on internal data of the Financial Directorate             of Slovakia, 2015.                  From a macroeconomic point of view, the commercialization of nonprofit             organizations is not very widespread in Slovakia. Approximately 3% of nonprofit             organizations deal with some type of business activities. From 2008 to 2013, the             business revenues averaged €85,584. For those organizations that use commer-             cialization in addition to their main activity, business revenues were about 20%             of the total revenue.               4.3.3. Potentials of nonprofit commercialization                Following a theory and research review and the presented data analysis that             indicated particular issue areas in relation to nonprofit commercialization, we             suggest focusing on three main research areas (cf. Vaceková \& Prouzová, 2014)             in Slovakia and the Czech Republic.                First, subsequent research should investigate the motives behind the entre-             preneurial activities of NPOs. There are several theories and some partial empir-             ical findings dealing with the commercialization of NPOs; however, a relatively             small amount of research has been devoted to exploring the actual motives of             NPOs for their increased reliance on profit-based resources. Following Kerlin             and Pollak (2011), we suggest examining whether there has been an increase in             nonprofit commercial revenues, and if so whether declines in government grants             and private contributions are behind the increase. Moreover, the entrepreneurial             motivation among Slovak and Czech nonprofits when confronted with the non-             distribution constraint should be understood. We suggest exploring how „false             commercialization” or „for-profits-in-disguise” could be conceptualized and             empirically identified.                Second, potential research should explore the overall effect of the process of             commercialization on NPO goals and their fulfillment. It has been argued that             the process of commercialization leads to the significant emancipation of NPOs,","Chapter 4: Current state of funding of nonprofit organizations         85                both in terms of financial independence and in the ability to focus on their goals             without needing to fulfill the agendas of donors (public agencies, companies,             etc.) Advocates of the opposite perspective have argued that commercialization             in itself constrains NPOs and forces them to focus on sub-fields or on areas that             may be attractive to potential customers rather than relating to the NPO’s main             mission. Most studies thus far have been descriptive, providing some insights             into understanding this phenomenon but not offering a comprehensive expla-             nation that takes all of the possible factors into account. To explore the overall             perceived impact of NPO commercialization would be of great importance in             Slovakia and the Czech Republic.                Third, potential research should assess the impact of NPO commercializa-             tion on their goals/mission scale. To bring theoretical innovation to the research             area, we link the issue of nonprofit commercialization with the concept of „so-             cial dilemma” (Pies, 2009; Pies, 2012; Suchanek, 2007), which is prominent in             constitutional economics and economic ethics. The shorthand definition of so-             cial dilemmas is „situations in which collective interests are at odds with private             interests” (Kerr, 1983). The focus of this suggested future research is related to             social dilemmas: does commercialization lead NPOs to focus on a smaller au-             dience and on the advancement of narrow interests in order to increase the re-             sources from particular profit activities? Or does this process rather compensate             for some type of (lacking) resources while keeping NPOs on track in providing             public services, defending broad public interests, and responding to the needs             of society at large? The social dilemma approach to NPO commercialization has             not yet been pursued (Valentinov, Nemec \& Vaceková, 2015).               4.4.  Financial controlling in nonprofit organizations                 One condition for a successfully functioning organization is financial provi-             sion. The financial question of the existence of nonprofit organizations is con-             nected with particularities derived from their service and non-commercial             status in the society. Nonprofit organizations currently face tougher forms of             competition than ever before, which inevitably requires the successful manage-             ment of the difficult task of mastering and applying modern methods of gaining             new financial resources in order to ensure the offer of public services in a range             that corresponds with society’s needs.                Financial management can be seen as the dominant management task, fo-             cused on all of the economic ties of an organization, including basic activities             such as financial planning, financial decision making, financial operations man-             agement, financial analysis, and financial controlling (Lament, 2011; Lament,             2012). These activities are important for acquiring financial capital, contributing","86                            Nonprofit organizations in selected CEE countries ...                to its suitable allocation and usage, reallocating financial gains, and recording             and analyzing financial processes.                In the nonprofit environment, financial controlling as a modern management             tool is gaining in importance. Authors often differ in how they define the term             „controlling”. Over time, the number of views has increased and crystallized.             In terms of timing, we can distinguish the controlling that is focused on long-             term management, i.e. strategic controlling, and that which concerns short-term             management, i.e. operational controlling (figure 15).                                                      KEdZK>>/E'                                  Operational controlling            Strategic controlling                    Controlling        Financial           Capital                 in-plant          controlling        controlling              Figure 15. Controlling structure             Source: Vaceková, 2013.                 The aim of financial controlling is to secure the liquidity and financial sta-             bility of an organization. The term „financial controlling” mostly applies to the             cash flow management outside of an organization. It points out problems, sends             warning signals, and gives managers advice for making the right decisions. Fi-             nancial controlling offers important advantages and contributions, such as in-             creased financial sources, as well as their proper allocation and administration.               4.4.1. Utilization of financial controlling in Slovak nonprofit organizations                We used empirical data to assess the current state of the implementation of             financial controlling and its tools in nonprofit sector organizations in Slovakia.             We assumed that it was necessary to apply the chosen controlling tools that were             commonly used in the profit sector to the conditions of the nonprofit sector (Va-             ceková, 2011). In the interest of long-term sustainability, nonprofit organizations             have to take on modern management methods, and under the current difficult             economic conditions, the utilization of controlling is an essential condition for             the success of any organization (Kuvíková \& Vaceková, 2010).","Chapter 4: Current state of funding of nonprofit organizations         87                   The data used were obtained in a pilot primary research (pre-research) using             the sociological method of a structured questionnaire. We created two types of             questionnaires – one for the governmental (state) nonprofit organizations and             one for the nongovernmental nonprofit organizations. Sequentially, we classified             the organizations according to chosen criteria such as the area of their activities,             their legal form, the age of the organization, the number of its employees, and             the seat of the organization.                We built the questions following the same structure for both types of ques-             tionnaires. The pre-research part of the questionnaires was divided into two top-             ics. In the first one, we wanted to determine whether the nonprofit organizations             had already implemented financial controlling. Next, we asked the organizations             that had not yet implemented financial controlling if they were interested in its             implementation in the future and how it could be used. Then we asked the non-             profit organizations that had already implemented financial controlling about             the reasons for its implementation and the advantages of its utilization. We were             also interested in who was responsible for the financial controlling in the organi-             zation. In the second part of the questionnaire, we focused on the utilization of             selected tools of financial controlling and on activities that were performed by             the nonprofit organizations while implementing these tools.                We sent the questionnaires to 260 respondents from nongovernmental non-             profit organizations and to 300 respondents from governmental nonprofit or-             ganizations using a chosen method of electronic distribution. For the research             purposes, we gained 53 completed questionnaires from the nongovernmental             nonprofit organizations and 65 from the governmental nonprofit organizations.             The number of respondents who took part in the pre-research was verified in             several ways. According to Blišťan (1999) the minimum range of the sample can             be determined by the following formula:                                              g   ) u (  − 1                                        n min =  4δ ) 2  + 1                        (1)                                               2                                                 s                                                 (                When considering the relative error of standard deviation δ(s) = 0.1 and             normal distribution with g 2  = 3, the recommended minimum number of re-             spondents was 51. Both our sample files met this condition. The sample of re-             spondents reflected the current state of the structure of NGOs in Slovakia. The             appropriateness of the structure and scope of the sample were confirmed by the             statistical significance of the results of tests carried out by selected methods of             analysis of qualitative data.                We placed the questionnaires on the internet using Google domain’s func-             tions. Respondents were directed to the questionnaire by a hypertext link in an             e-mail. In the direct electronic data collection, the primary data were saved in","88                            Nonprofit organizations in selected CEE countries ...                MySQL database, from which they were exported to the Microsoft Excel pro-             gram. For a follow-up statistical evaluation, these primary empirical data were             transformed into a symbolic code language. It was necessary to develop a system             of categorizing the examined empirical phenomena and a coding key (Kuvíková             \& Vaceková, 2009). During the data processing, we applied some relevant math-             ematical-statistical methods using the SPSS program.                At the beginning of our pre-research, we investigated the state of controlling             used in the nongovernmental nonprofit organizations and in the governmental             nonprofit organizations.                More than half of the nongovernmental nonprofit organizations involved in             the pre-research (58.49%) had not yet implemented financial controlling. Only             41.51% of the nongovernmental nonprofit organizations had applied financial             controlling.                The situation in the governmental nonprofit organizations was reversed.             There, the respondents who had established a system of financial controlling             predominated, representing more than 60% (figure 16).                       Governmental                 Organizations             63,08%                       36,92%                                               Established  Not established               Nongovernemental               Organizations        41,51%                       58,49%                            0%    10%   20%   30%  40%   50%   60%   70%   80%   90%  100%             Figure 16. State of utilization of financial controlling in nonprofit sector organizations             Source: Vaceková, 2013.                  We tested the nongovernmental nonprofit organizations and the governmen-             tal nonprofit organizations by the chosen statistical methods of data dependence             analysis. The aim was to find whether there was any dependence between the             utilization of financial controlling and some pre-established criteria: legal form,             average evidentiary number of employees, year of organization’s constitution,             and seat of organization (table 31).","Chapter 4: Current state of funding of nonprofit organizations         89                Table 31. Analysis of dependence of financial controlling utilization on chosen iden-                      tifying criteria                       Dependence             Dependence test        Dependence rate              of financial controlling utilization  Fisher’s Exact Test/Sig  Cramer’s V              on the legal form                  0.004b                  0.353              on the number of employees         0.010b                  0.331              on the age of the organization     0.160b                  0.207              on the seat of the organization    0.892b                  0.162             Source: Vaceková, 2013.                  We examined whether there was dependence between the utilization of fi-             nancial controlling and the legal form of the nonprofit organization.                We used Fisher’s exact test to test the dependence of two variables. The test             reveals if there is a dependence between the studied characteristics at a level of             significance of α = 0.1. To verify the dependence, it is necessary to sum up the             partial probabilities. If the sum of the probabilities was smaller than the level of             significance (p ≤ α), the significance of the relation between the studied char-             acteristics and the existence of some dependence is proved. We calculated the             strength of this dependence using Cramer’s V coefficient (it takes values from             0 to 1), where a correlation of 0.1 to 0.3 meant a weak dependence, 0.3 to 0.5             a medium-strength dependence, 0.5 to 0.8 a strong dependence, and a correla-             tion higher than 0.8 meant that there was a very strong dependence between             the studied characteristics.                According to Fisher’s exact test (table 31), there was a dependence between             the legal form of a nonprofit organization and the utilization of financial con-             trolling, because the Fisher’s test value was 0.004, which is lower than 0.1. Ac-             cording to Cramer’s V coefficient (0.353), it was a medium-strength dependence.             There was an implemented system of financial controlling mostly in the organi-             zations with the legal form of nonprofit organizations offering public services             and foundations. Civic associations that took part in our pre-research had not             yet implemented a system of financial controlling. In the examined budgetary             and subsidiary organizations, financial controlling was used by more than half             of the respondents.                We examined whether there was a dependence between financial controlling             and other identifying criteria such as number of employees, age of organiza-             tion, and the seat of the organization. The dependence was confirmed only for             the number of employees and the size of organization. Based on Fisher’s exact             test (0.010) and the degree of dependence (Cramer’s V), there was a medium-             strength dependence between these two indicators. This means (according to the","90                            Nonprofit organizations in selected CEE countries ...                results of the pre-research) that there was a difference in financial controlling             utilization in voluntary, small, and big organizations. Organizations operating             solely on the principle of volunteerism had not implemented financial control-             ling. The situation in the organizations that had one to five employees was bal-             anced; financial controlling was commonly used in the organizations with six             or more employees.              Reasons for implementing financial controlling in nonprofit sector organizations                 There were various reasons for implementing financial controlling. We ex-             amined the reasons separately in nongovernmental nonprofit organizations and             in governmental nonprofit organizations. The reasons are shown in figure 17.                    72,73%        72,73%       Nongovernmental Organizations  Governmental Organizations                      68,29%                                    65,85%                                                                        18,18%                                                    9,76%                                                                  4,88%    4,50%                                               0%                               2,44%                   Ensuring      Improve        Pressure   Experience of others  other               the financial balance  the fund management  of the surroundings             Figure 17. Reasons for implementing financial controlling              Source: Vaceková, 2013.                 The most common reason for implementing financial controlling accord-             ing to the nongovernmental nonprofit organizations that took part in our pre-             research was to ensure financial balance and to improve fund management (both             72.73%), which is a fact that we want to emphasize. For NGOs, it is necessary to             manage the gained funds efficiently. This is followed by the experience of other             organizations (18.18%) and other reasons (4.50%), e.g. overview of finances.","Chapter 4: Current state of funding of nonprofit organizations         91                None of the NGOs considered the pressure of the surroundings to be a reason             for implementing financial controlling.                In governmental nonprofit organizations, the most common reason for im-             plementing financial controlling was financial stability (68.29%) followed by             improving fund management (65.85%), pressure of the surroundings (9.76%),             and the experience of other organizations (4.88%). The other reasons that were             stated by 2.44% of government organizations including the imposition of the             obligation of the founder.                Based on the pre-research results, the biggest difference between govern-             mental and nongovernmental nonprofit organizations is in the pressure of the             surroundings. This may be due to the fact that the governmental nonprofit or-             ganizations are under a greater compulsion to implement controlling in order to             make the use of their resources more economical. The governmental nonprofit             organizations are linked to the budget of their founder and they are financed             mostly from public resources.               Information obtained from financial controlling                In addition to examining what led the organizations to implement financial             controlling, we were interested in whether the implemented system of financial             controlling could help manage the organization. All the organizations with im-             plemented systems of financial controlling answered this question positively.             More than 66% of respondents considered that financial controlling would help             absolutely; 33.87% of respondents thought that it would help only partly.                It is important to know how organizations capitalize on the information ob-             tained from financial controlling. Therefore, in the pre-research we focused on             how the controlling information system could help in specific situations (table 32).               Table 32. Significance of information obtained from financial controlling                 Significance                     of con-                    trolling   Information    from financial   for management   financial stability  Sends warning   to manage funds  in monitoring   financial plans                Type of NGO        obtained   controlling  Important    activities  Ensures    signals  Helps    Gives advice  Helps              NGOs         Average       0.636   0.773   0.455   0.591   0.318   0.455                           Standard error   0.105  0.091  0.109  0.107   0.102   0.109                           of the mean              Governmental  Average      0.585   0.683   0.195   0.575   0.073   0.333              NPOs         Standard error                           of the mean   0.078   0.074   0.63    0.079   0.041   0.076             Source: Vaceková, 2013.","92                            Nonprofit organizations in selected CEE countries ...                   Based on the primary data, the information obtained from financial con-             trolling in most NGOs serves to ensure financial equilibrium (0.773 ±0.091).             This information is also important for management activities (0.636 ±0,105),             it helps to manage funds (0.591 ±0.107), it shows warning signs, and it helps             in monitoring financial plans (0.455 ±0.109). The fewest respondents agreed             that information obtained from financial controlling assists in and coordinates             recommendations for the future of the organization. In governmental nonprofit             organizations, the information is more useful for controlling financial plans             (0.333 ±0.076) than for showing warning signs (0.195 ±0.063).               Person responsible for financial controlling                We focused on the person responsible for utilizing various financial control-             ling tools. We wanted to find whether there was a dependence between the person             responsible for using some selected tools and the legal form of the organization.                Based on the dependence test (table 33), there was a medium-strong depend-             ence between the financial manager and the economist as the person responsible             for the financial controlling and the legal form of the organization. The legal form             of the organization determines whether the financial manager or economist is             responsible for financial controlling in the organization. An economist is the most             preferred responsible person in budgetary and subsidiary organizations.               Table 33. Dependence of a person responsible for carrying out the financial control-                      ling on selected identification criteria                                                 Test of dependence  Degree of dependence                         Dependence                                               Fisher’s Exact Test/ Sig  Cramer’s V              Controller vs. legal form               0.629b                 –              Financial manager vs. legal form        0.018b               0.438              Economist vs. legal form                0.05b                0.480              Chairman, director vs. legal form       0.156b                 –              Other responsible person vs. legal form  0.860b                –              Economist vs. number of employees       0.000b               0.641              (size of org.)              Economist vs. age of organization       0.024                0.384              Source: Vaceková, 2013.                 We examined the dependence of the person responsible for utilizing financial             tools on the size of the organization (number of employees) and on the age of             the organization. We found a strong dependence between the size of the or-             ganization (number of employees) and the person responsible for the financial","Chapter 4: Current state of funding of nonprofit organizations         93                controlling and a medium-strong dependence between the economist as a per-             son responsible for the financial controlling and the age of the organization. The             size of the organization and the age of the organization determine whether an             economist was responsible for financial controlling in the organization.                Based on the pre-research outputs, an economist was responsible for utilizing             financial controlling in the organizations established before 2000. In the organi-             zations that were established after 2000, some other person was responsible for             financial controlling, for example a director, controller, or financial manager of             the organization.                In the nongovernmental nonprofit organizations, usually a director or             a chairman was responsible for financial controlling (59.09%), then a financial             manager or an economist (27.27%), and finally a controller (13.64%). Another             person responsible for financial controlling, e.g. volunteers who understand the             issue, a project manager, or an inspector, was stated by 13.64% of respondents.                In governmental nonprofit organizations, an economist was responsible for             financial controlling (75.61%), then a director or a chairman of the organization             (31.71%), then a controller (14.63%), and finally a manager of the organization             or another responsible person, such as a financial manager or some other com-             petent employees (9.76%) – figure 18.                                                     75,61%                                                              Nongovernmental Organizations                                                              Governmental Organizations                                                             59,09%                                                                         31,71%                               27,27%        27,27%                  13,64% 14,36%                                              13,64%                                     9,76%                                      9,76%                     Controller  Financial manager  Economist  Chairman, director  Other person             Figure 18. Person responsible for utilizing financial controlling and its tools              Source: Vaceková, 2013.","94                            Nonprofit organizations in selected CEE countries ...                   Based on the pre-research results, we can conclude that in nongovernmental             and also in governmental nonprofit organizations there are various people re-             sponsible for utilization of financial controlling and its tools.              Financial controlling tools                 The next part of our pre-research focused on the utilization of some financial             controlling tools: debt controlling, inventory controlling, controlling of working             capital, ongoing liquidity controlling, and controlling of short-term liquidity             surpluses and deficits. Figure 19 gives an overview of the use of these tools in             the nonprofit organizations that participated in our pre-research.                Debt controlling and controlling of ongoing liquidity were applied equally by             86.36% of nongovernmental nonprofit organizations (figure 19) where financial             controlling was implemented. Controlling of short-term liquidity surpluses and             deficits as a part of the financial controlling was used in 68.18% of the organiza-             tions. The least-used financial controlling tool was inventory controlling, used             only by 36.36%.                     86,36%                              86,36%    Implemented  Not implemented                                                                           68,18%                                          63,64%                                          36,36%                                                                              31,82%                           13,64%                              13,64%                          Debt             Inventory      Ongoing liquidity  Controlling of short-term                    controlling       controlling       controlling  liquidity surpluses and deficits             Figure 19. The utilization of financial controlling tools in Nongovernmental                       Organizations.             Source: Vaceková, 2013","Chapter 4: Current state of funding of nonprofit organizations         95                   An overview of the financial controlling tools used in governmental non-             profit organizations is shown in figure 20.                                                        90,24%                  85,37%                                         Implemented  Not implemented                                                56,10%                        56,10%                                      43,90%                                     43,90%                              14,63%                                                             9,76%                         Debt             Inventory       Ongoing liquidity  Controlling of short-term                    controlling       controlling       controlling  liquidity surpluses and deficits             Figure 20. The utilization of financial controlling tools in governmental nonprofit                       organizations             Source: Vaceková, 2013.                 Ongoing liquidity controlling was applied by 90.24% of the governmental             nonprofit organizations that use financial controlling, followed by debt con-             trolling (85.37%). Controlling of short-term liquidity surpluses and deficits             was used in 56.10% of organizations. The least-used financial controlling tool             was inventory controlling, applied by 43.90% of the governmental nonprofit             organizations.                Nongovernmental and governmental nonprofit organizations that have im-             plemented a system of financial controlling do not have to use all the possible             financial controlling tools.               Barriers to implementing financial controlling                A financial controlling system had not yet been implemented by 58.49% of             nongovernmental and 36.92% governmental nonprofit organizations that par-             ticipated in our pre-research.","96                            Nonprofit organizations in selected CEE countries ...                   We were interested in whether the organizations that did not use a financial             controlling system were considering implementing one in the future and in what             barriers they might face in this process (figure 21).                                                              Interested                                                        36%                                        Not interested                                          64%                   Figure 21. Interest of nonprofit organizations in implementing financial controlling             Source: Vaceková, 2013.                  The results of the pre-research showed that only 35.38% of the nongovern-             mental nonprofit organizations that did not apply a financial controlling system             were interested in implementing one in the future. Among the governmental             nonprofit organizations, the interest in implementing a financial controlling sys-             tem in the future was even lower: only 12.5%. This could be because governmen-             tal nonprofit organizations are connected to the budget of their founder, who             decides about the implementation and the use of financial controlling system.                More than half (58.49%) of the nongovernmental nonprofit organizations             had not implemented any financial controlling system. We tried to find the bar-             riers to implementation and their significance.                We used the Friedman test to assess the correspondence of medians for k             variables (k>2) based on the average and total orders for each variable sepa-             rately. The basic idea of this test is that if there is no difference between the             selection yields, there is no difference between the average orders (Řezánková,             2010). Table 34 presents the results of the Friedman test.                According to the results of Friedman test, there is a significant difference             between the barriers. Most organizations (74.19%) considered the lack of fi-             nancial resources to be a barrier. Human resources and the lack of information             about financial controlling were equally barriers to 54.84% of the respondents.             The lack of material resources and insufficient information systems were equally","Chapter 4: Current state of funding of nonprofit organizations         97                barriers to implementing financial controlling for 16.13%. Nongovernmental             nonprofit organizations also identified some other reasons, such as lack of inter-             est in implementing financial controlling and inefficiently implemented financial             controlling due to a low number of employees.               Table 34. Friedman test for correspondence of barriers to implementing financial                      controlling in NGOs              Barriers to implementing    Average  Absolute frequency           31              financial controlling     rating              Lack of financial resources  4.61  Chi-square                     53.261              Lack of human resources   4.03    df                              5              Lack of material resources  2.87  Asymp. Sig.                     .000              Insufficient information system 2.87  Monte   Sig.                .000              Lack of information about fi-  4.03  Carlo   99% Con-  Lower Bound .000              nancial controlling               Sig.    fidence              Other                     2.58            Interval   Upper Bound .000             Source: Vaceková, 2013.                 Implementing financial controlling in nonprofit organizations brings these             organizations some significant benefits connected to the functions of financial             controlling. Nonprofit organizations cannot carry out their activities without suf-             ficient financial support. Therefore, they should consider applying new manage-             ment methods, appropriate means of financial security, and more efficient use             of funds (e.g. Kozuń – Cieślak, 2011). The growing competition for donations,             grants, and subsidies simultaneously force organizations to more efficiently use             their resources. For these reasons, selected financial controlling tools should be             implemented in governmental and nongovernmental nonprofit organizations.","","ChapTeR 5                            Social innovations as future trend                              in nonprofit sector research                   Innovation was previously associated primarily with the business sector.             The aim of introducing innovation was therefore primarily profit. However, the             concept of social innovation is increasingly popular. The purpose of a social in-             novation is rather different; its effects and impacts are on society. The bearers of             social innovations are usually social enterprises.               5.1.  Social entrepreneurship in the Czech Republic and Slovakia                 The main criterion in the Czech Republic according to which an entrepre-             neur can be considered a social entrepreneur is the employment of disadvan-             taged people or people at risk of social exclusion or already socially excluded             people, including (Boukal, 2013, p.162):                 – people with disabilities – people who are disadvantaged in comparison to oth-                er members of society because of a health disability (Act No.108/2006 Coll.);                 – children, teenagers, and young adults – people endangered by social patholo-                gies leaving institutions at the age of 15 to 26 years;                 – ethnic and national minorities, people from different socio-cultural                environments;                 – foreigners – people from other countries legally residing in the Czech Repub-                lic for at least one year;                 – the homeless – people having no accommodation, living in emergency hous-                ing, people leaving facilities designed for institutional or protective care, and                people who have ended a term of imprisonment;                 – victims of crime, victims of domestic violence, victims of trafficking, com-                mercially abused people (Kolibová, Václavíková \& Bělová, 2010);                 – caregivers of a person who is at risk of social exclusion;                 – people who have been diagnosed with substance abuse;","100                           Nonprofit organizations in selected CEE countries ...                    – people registered as job seekers with the Employment Office of the Czech                Republic for more than one year;                 – other unspecified people socially excluded or endangered over three months                before entering into the employment relationship.                In Slovakia, a social enterprise may also be established to create quality em-             ployment or job opportunities especially for people who are disadvantaged in             the open labor market. The Act on Employment Services no. 5/2004 Coll. de-             fines disadvantaged job seekers as:                 – citizens under 26 years of age who completed the appropriate level of educa-                tion as a vocational preparation in full-time study within the last two years                and have since had no regular paid employment;                 – citizens over 50 years of age;                 – citizens in the register of job seekers for at least 12 consecutive calendar                months (i.e. long-term unemployed);                 – citizens who have completed education lower than secondary education un-                der a special regulation;                 – citizens who had no regular paid employment for at least 12 consecutive cal-                endar months before registering as a job seeker;                 – third-country nationals who have been granted asylum or protection;                 – citizens living as single adults with one or more dependents or citizens living                as single adults with at least one dependent school-age child;                 – citizens with disabilities.                In the Czech Republic, many definitions are used to characterize social enter-             prise. Each definition includes very similar elements. „In terms of Schumpeter’s             definition of enterprise, a social enterprise is a socially oriented enterprise, im-             plemented through an innovative intent, and achieved through economic activity             in the presence of real economic risks” (Schumpeter \& Bottomore, 1987). This             definition is based on the European concept, as understood by the European             Commission and the OECD, and the social enterprise is primarily considered to             be a small business (Hunčová, 2007). Social enterprise generally provides specific             services that are beneficial to the society as a whole, and it is principally engaged             in increasing employment, but also in protecting against risks to members and             local communities (ibid). Dohnalová and Průša also attributed to social enter-             prises the obligation to match the characteristics of the European context. „So-             cial enterprises represent a subset of social economic entities, which match the             defining elements (economic and social characteristics) compiled on the basis of             surveys by the European research company EMES” (Dohnalová \& Průša, 2011).                According to Boukal, the term social enterprise can be replaced with the             concept of a social company, which is characterized by several similar features.             „Social companies deal with so-called social entrepreneurship. They are business             subjects which operate on the market and offer job possibilities for the under-","Chapter 5: Social innovations as future trend in nonprofit ...        101                privileged” (Boukal, 2013, p. 161). The people who are defined as disadvantaged             should be provided with adequate working and psychosocial support at work             (EQUAL online, 2008). The founders of social companies may be nonprofit or-             ganizations, which constitute a separate legal entity operating as social compa-             nies. There is no legislative definition for social companies yet; they are gov-             erned by the standards set by the bearers of the idea of social companies (ibid).                Significant developments in the field of social economy and social enterprise             were collected and completed in 2008 by the EQUAL initiative. The research in-             formation was used in public administration, helping emerging businesses and all             those who were interested in the social economy (Social companies online, 2007).             At the same time, social enterprise was defined as a „subject of social entrepre-             neurship, i.e. a legal or natural person with the appropriate trade license. A so-             cial enterprise is an enterprise with prevailing social objectives, whose economic             surpluses are reinvested in order to achieve these objectives within a company             or community, and which is not governed by the need to maximize earnings of             shareholders and owners” (ibid). The definition of a general company is incor-             porated into the definition of social enterprises. This definition is common for             all business entities, but when fulfilling the objectives of a social enterprise, the             profit is not for the enrichment of a business entity, but it is used in the company             to meet the set objectives, which include in particular the integration of socially             or physically disadvantaged people into the business venture (Boukal, 2013).                A business is defined in the Commercial Code (Act No.513/1991 Coll.) as             a „continuous activity carried out independently under the entrepreneur’s own             name and on their own responsibility for profit.” This definition applies for both             the Czech Republic and Slovakia.                Slovakia has a definition of social enterprise similar to the one used in the             Czech Republic and by EMES. Some Slovak authors who are considered to be             experts in the field of social economy had additional definitions, presented here,             and social enterprise was also defined by Slovak legislation.                Social entrepreneurship is „a special kind of business based mainly on non-             profit and non-market or partial market relations between pluralist providers             who operate in the public interest” (Korimová, 2008, p. 63). The subjects of             social entrepreneurship often act as an intermediate labor market with work             positions that do not require high qualifications to ensure that citizens excluded             from the current labor market can acquire a job. Social entrepreneurship is seen             as a „classic business with a main activity in a social field and with some social             principles” (Korimová, 2008, p. 67).                Syrovátková (2008) defined a social enterprise as a business with primarily             social objectives, whose surplus value is reinvested in the enterprise. Social en-             terprises have three common characteristics:             1)  focus on entrepreneurship;","102                           Nonprofit organizations in selected CEE countries ...                2)  social objectives;             3)  social ownership.                 Social enterprises are oriented toward a market production of goods and             services and operate in a competitive environment. They aim to be viable, sus-             tainable, and profitable businesses. These enterprises have clearly and explic-             itly defined social objectives, e.g. job creation, education, and training for low-             skilled or unskilled citizens, and provision of social services and local services for             a community. They are accountable to their members and the wider community             for their social, environmental, and economic impact. Social ownership of the             social enterprise enables groups of users, clients, and local communities to par-             ticipate in governance and decide on important issues concerning the enterprise.                Amendment to Act no. 5/2004 Coll. on Employment Services officially al-             lowed social enterprise institution in the Slovak legislation. The amendment is             a relatively new instrument of active policies on the labor market for strengthen-             ing cohesion and social inclusion. This instrument was modeled on systems of             social entrepreneurship in other countries and on experience from projects that             were completed in Slovakia. The amendment was prepared by the Ministry of             Labor, Social Affairs, and Family in order to improve conditions for the devel-             opment of social economy and social entrepreneurship. The amendment came             into effect on September 1, 2008, and created the legal possibility of establishing             social enterprises in Slovakia.                Under the Act on Employment Services, a social enterprise is a legal or natu-             ral person who:                 – provides support and assistance to employees who, before taking up employ-                ment, were disadvantaged job seekers when looking for employment on the                open labor market;                 – is registered in the register of social enterprises maintained by the Central                Office of Labor, Social Affairs and Family;             and further:                 – the share of employed staff who were disadvantaged job seekers must repre-                sent at least 30% of the total number of employees;                 – at least 30% of the funds derived from the income of the main activities that                remain after payment of all business expenses for the relevant period accord-                ing to tax return are annually used to create new job positions or improve                working conditions.                The status of social enterprise is recognized by a decision by the Central Office             of Labor, Social Affairs, and Family following a written request from a legal entity             or an individual for an indefinite period. The application for the status of social             enterprise includes a business plan with a calculation of expected revenue, expens-             es, and profit before distribution, as well as documents proving the fulfillment of","Chapter 5: Social innovations as future trend in nonprofit ...        103                the above conditions, an extract from the business register or another document             proving permission to conduct business, a proof of ownership or lease of prem-             ises, proof of material equipment for carrying out business activities, and proof of             cooperating entities and staff for fulfilling the main activity of social enterprise.                For the purposes of employing disadvantaged job seekers, a social enterprise             cooperates with local offices of labor, social affairs, and family and with other             legal entities or individuals that promote or perform the integration of disad-             vantaged job seekers in the labor market.                There is a special group of social integration enterprises, called Work Inte-             gration Social Enterprise (WISE) that are different from the social enterprises             described above, and are primarily focused on employing socially or physically             disadvantaged people in the labor market. Many European countries have al-             ready developed specific programs to support this type of business, because it             is necessary to tackle long-term unemployment. Often, only social integration             enterprises are perceived as social enterprises (Defourny \& Nyssens, 2010).                According to Hunčová, a social integration enterprise is characterized in the             following way: „WISE is a social enterprise for integrating socially excluded in-             dividuals. It is a participatory, democratic, nonprofit and not-for-profit economy,             enabling the employment of handicapped people and providing social services,             especially of a personal nature, including retraining, job mediation, support of en-             trepreneurial initiatives, and the like. A specific social company providing employ-             ment in an affected region may be a self-employed person” (Hunčová, 2007, p.19).                The thematic network TESSEA, which brings together entrepreneurs, non-             profit organizations, and other institutions, regards a social integration enter-             prise as „a subject of social entrepreneurship”, i.e. a legal entity established under             private law or a natural person who complies with the principles of a social             integration enterprise. A social integration enterprise pursues the public benefit             goal of the employment and social inclusion of disadvantaged people in the la-             bor market, and this goal is formulated in the founding documents. It is created             and developed on the basis of the concept of the threefold benefit: economic,             social, and environmental (TESSEA online, 2011, p.15).                The EMES research team identified 160 social enterprises in 10 countries             meeting the EU classification of social integration enterprises according to their             activity (online EMES, 2004).                • WISE focused on the employment of significantly disadvantaged groups                whose employment opportunities are limited. The aim is to create long-term                jobs supported by public funds.                • WISE creating long-term self-financed jobs, which are financed from public                funds in the initial phase. The medium-term goal is to achieve self-financ-                ing capacity and to support employees in order to enhance their skills and                competencies.","104                           Nonprofit organizations in selected CEE countries ...                   • Transition WISE are a type of short-term project under which jobs or train-                ing are provided to disadvantaged people in order for them to increase their                skills and subsequently find a job on the open labor market.                • WISE aimed at re-socialization, which is adapted to people with mental ill-                ness or severe disabilities; the goal of these companies is their involvement                in structured activities and in helping to establish social contacts.                The Czech Republic has not yet put any legislative definition of social en-             trepreneurship into effect. As it is not possible to strictly define criteria that             a social enterprise should meet, it is also impossible to find a registry for all the             social enterprises in the Czech Republic. The company P3 - People, Planet, Profit             deals with mapping the current status of social enterprises, and a directory was             published on its website, the Czech Social Entrepreneurship. The directory was             created in the fall of 2012, the basis for including enterprises was a list of social             enterprises that was created under an earlier TESSEA project.                The directory was last updated via telephone interviews in the last quarter of             2013. In March 2015, the directory had 211 social enterprises. For greater clarity,             social enterprises are categorized according to the field of activity, place of busi-             ness, social benefit, and the target group. The directory is very helpful in provid-             ing a realistic picture of the operation of social enterprises in the Czech Republic.             However, not all social enterprises are registered in it; a company that is consid-             ered to be a social enterprise has to complete a simple questionnaire and register             itself, it is subsequently added to the registry only after receiving approval.                In addition to the register, we provide data from the Directory of Social En-             terprises (Czech Business online). The directory provides an overview of social             enterprises, divided by region, business area, place of activity, social responsibil-             ity, and target groups. The social enterprises listed in the directory were analyzed             to create an overview of the development of social enterprises based on the year             of foundation and legal status (figure 22).                The claim that the number of social enterprises has increased exponentially             in the last decade can be confirmed by an analysis of their development. The             first social enterprises were established as early as 1992, when four were created.             There were no significant changes in their development until 2007. In 2007 and             2008, nine social enterprises were established. After the economic crisis (2008-             2009), the number of social enterprises started to increase. From 2009 until the             first quarter of 2014, it was possible to draw subsidies from the ESF (European             Social Fund) and ERDF (European Regional Development Fund), and therefore             the number of social enterprises increased rapidly, with a record number of 45             social enterprises established in 2012. With the end of the entitlement to the             subsidy, the number of start-ups was limited and only 10 were created in 2014.             The total number of registered social enterprises is currently 211.","Chapter 5: Social innovations as future trend in nonprofit ...        105                   50                                                                             45                45                40                35                                                        34                                                                               31                30                25                20                                                     19                                                                    15                15                10                                       7     9  9               10                  5  4     3    3     3             5  3                       2          2     1  2  2  2                 0          0                               0               Figure 22. Number of social enterprises              Source: prepared by the authors, based on data from the Directory of Social Enterprises, 2015.                           Other   5               Public trading company  1                          JSC   2                Church organization  4                     Cooperative     12                    Self-employed     14                  Civic association       23                  Public benefit org.                         56                          Ltd.                                                     94                             0    10   20    30    40   50    60    70   80    90   100             Figure 23. Social enterprises according to their legal form              Source: prepared by the authors, based on data from the Directory of Social Enterprises, 2015.","106                           Nonprofit organizations in selected CEE countries ...                   Most social enterprises have an „Ltd.” legal form. Until the end of 2014, Ltd.             was the largest group (94 social enterprises in figure 23). The second largest             group included 56 public benefit organizations. This legal form was abolished             in 2014, so its change into a different legal form should be expected. There are             23 social enterprises with the legal form of a civic association, 14 self-employed,             and 12 cooperatives. Five social enterprises reported that their legal form is             „other”. Two of these companies have the legal form of „social cooperative”,             which is not specified in the directory, or the registered companies stated „oth-             er”, but they fall under one of the specified forms.                Social enterprises operate in various areas; often several areas are reported as             realms of activity for one social enterprise.                According to the social enterprises registered in the directory, 47 companies             are active in horticultural services, greenery, property maintenance, and cleaning             work. The second most frequently chosen area was the „other” category; a more             detailed examination showed that companies chose at least one specified area             and additionally indicated the „other” category. For example, one company deal-             ing with the sale and leasing of ships, claimed „transport, transport equipment             and spare parts” as its scope of business and additionally selected the „other”             category. The business scope of this category cannot be strictly defined; enter-             prises chose this category if they thought that the delimited categories will not             cover their total scope of business (based on the questionnaires the companies             fill in for themselves). The least represented areas of business are „audiovisual -             technology and services” and „electronics - production and sale” – see figure 24.                                              192                                                          128                                   120                            67                                                                46                                                                           12                        Enviroment  Development  Equal  Social area  Culture  Other                      and ecology  of local  opportunities                                communities             Figure 24. Social enterprises according to their social beneficial effects             Source: prepared by the authors, based on data from the Directory of Social Enterprises, 2015.","Chapter 5: Social innovations as future trend in nonprofit ...        107                   Social enterprises most often state that their social contribution is in the             area of equal opportunity (employment of socially or physically disadvantaged             people) in combination with a focus on the environment and ecology, and the             social or cultural development of local communities. A social contribution was             reported by 192 enterprises. A total of 120 businesses are involved in the devel-             opment of the local community; 128 social enterprises deal with the provision of             social counselling and social assistance. A total of 46 companies claimed culture             as their public contribution.                In order for a company to be considered socially integrated, it is necessary for             it to employ a fixed proportion of socially or physically disadvantaged people.                The largest target group specified in the area of equal employment opportuni-             ties was people with disabilities, with 143 enterprises targeting this group. The             second largest group was the unemployed, with 68 companies focused on em-             ploying these socially disadvantaged people. Social enterprises are least focused             on integrating people with addictions to the regular labor market.                The positive development of social enterprises in Slovakia was interrupted             by non-transparent legislation in 2008 and funding that led to the preferential             treatment of some social enterprises while others were unable to continue in             their activities. Therefore, the officially registered social enterprises, as defined             in the Act on Employment Services, are not viewed very favorably in Slovakia,             as can be seen in the following text where we present the number of social en-             terprises, which is much lower than in the Czech Republic. Despite this, there             are several examples of good practices that fulfill the mission of social economy             and these enterprises do help in their environment. Also, between 2002 and             2014, many international scientific conferences at the Faculty of Economics at             Matej Bel University in Banská Bystrica, were organized on the topic of social             economy, social entrepreneurship, and social enterprise, which helped to estab-             lish a theoretical base for further social economy development.                The publicly available register of social enterprises presents a basic overview             of social enterprise characteristics in Slovakia. It includes characteristics such             as legal forms, economic activities within the social business, addresses, etc.             The register of social enterprises is maintained by the Central Office for Labor,             Social Affairs, and Family; the most recent data are from March 2014. At that             time, there were registered 44 active enterprises, 8 suspended enterprises, and 42             cancelled social enterprises that carried out social entrepreneurship in Slovakia             in various legal forms. We will focus on the active social enterprises.                Based on an analysis of the register of social enterprises, the biggest share of             social enterprises took the form of a limited liability company (Ltd.), with 23             enterprises (52%). The second largest group was social enterprises established             by municipalities at the local government level as council enterprises (10 enter-             prises, 23%). Civic associations (1) and public benefit organizations (3), which","108                           Nonprofit organizations in selected CEE countries ...                should be the main bearer of the social economy in our view, due to their similar             features (see table 3 comparing social enterprises and NGOs), were not used             very much as a legal form. An overview of the number of different legal forms             of social enterprises operating in Slovakia is presented in figure 25.                                                           Public benefit                                     Civic associations  organizations                                          2%                7%                                                             Natural entity                                                          16%                                         Ltd.                                         52%                                                      Municipality                                                        23%                  Figure 25. Overview of the legal forms of active social enterprises in Slovakia, 2015             Source: prepared by the authors, based on data from the Central Office for Labor, Social             Affairs, and Family.                 Generally, social entrepreneurship is not very widespread in Slovakia. If we             look at the overview of all the economic subjects and social enterprises, social             enterprises have only a minor share of the total number of economic subjects             (0.01%, table 35).              Table 35. Summary of economic entities and social enterprises by legal form              Legal Form               Number of entities  Active social   Share of active SE                                                       enterprises     of the legal form              Limited liability company    177,261            23             0.01%              Self-employment              337,182            7              0.00%              Cooperative                   1,542             6              0.39%              Subsidized organization        659              4              0.61%              Civic association             39,740            1              0.00%              Public benefit organization   1,630             3              0.18%              TOTAL                        558,014            44             0.01%             Source: prepared by the authors, based on data from the Statistical Office of Slovakia and             the Slovstat database, 2015.","Chapter 5: Social innovations as future trend in nonprofit ...        109                   Within the different legal forms, the number of social enterprises represented             by nonprofit organizations is also very low. In the past, there were more public             benefit organizations (PBOs); in the current register there are nine social en-             terprises with the legal form of PBO. Only three of those social enterprises are             active; two are recorded in the register as suspended and four as canceled.                The register of social enterprises publishes information about the economic             activities of Slovak social enterprises according to the statistical classification SK             NACE (Statistical Classification of Economic Activities in the European Com-             munity). An overview of these activities is shown in figure 26.                                 Arts, entertainment   Activities of extraterritorial                               and recreation   organisations and bodies                                   3%                  1%                    Human health and social work        Agriculture, forestry                          activities                      and fishing                           8%                               2%                                Education                      Manufacturing                                  3%                                                                  18%                   Administrative and support                   service activities                       21%                                                                     Water supply; sewerage,                                                                      waste management                                                                    and remediation activities                                                                            7%                                                                    Construction                        Professional, scientific                       11%                        and technical activities                              2%                                Wholesale and retail trade;                                                                 repair of motor vehicles                           Information                             and motorcycles                        and communication                              3%                             3%                          Accommodation and food              Transportation                            service activities                and storage                                11%                              7%             Figure 26. Overview of the economic activity of the active social enterprises in Slo-                       vakia, 2015             Source: prepared by the authors, based on data from the Central Office for Labor, Social             Affairs and Family.","110                           Nonprofit organizations in selected CEE countries ...                   The economic activity of social enterprises in Slovakia is relatively widely di-             versified. The most prevalent activities are administrative and support services,             manufacturing, construction, accommodations, food service, human health ser-             vices, and social work services.                5.2.  Innovations in the context of social economy                   and nonprofit organizations                 This chapter is based on works of Mikuš, T. \& Svidroňová, M. (2014),             Mikušová Meričková, B. \& Svidroňová, M. (2014), Nemec, J., \& Svidroňová, M.             2015 and Mikušová Meričková, Nemec \& Svidroňová (2015).                According to Lubelcová (2011), innovations play two social roles: instruments             of economic growth and instruments of social development. Connecting these             two roles is a new challenge for the increasingly important social innovations.                Social innovation, both as a concept and as a group of tools, includes a num-             ber of activities. From a broader perspective, social innovations can be defined             as any new strategies, concepts, terms, or organizations that disseminate and             promote the improvement of conditions for the functioning of civil society             (Markowska-Bzducha, 2013). The most important feature that distinguishes so-             cial innovation from the general concept of innovation is their targeted social             impact. This means that social innovations can result into qualitative changes             in the basic social structures (Wolak-Tuzimek, Duda, 2014).                The European Foundation for the Improvement of Living and Working Con-             ditions (2013) defines social innovations as new ideas in products, services, or             models. These new ideas address social problems, fulfill social needs, and create             new social relationships between groups in society, at the level of community,             municipality, or region. Social innovation can be formed by new stakeholders par-             ticipating in a decision, by a change in social service delivery affecting the status of             specific target groups, or by changes in social welfare (www.europedirectsnv.eu).                Social innovation can be described as an innovative solution to a social prob-             lem that is more effective, more efficient, more sustainable, and more just than             existing solutions; this innovative solution creates value from which society ben-             efits more than participating individuals (Center for Social Innovation, Stanford             Graduate School of Business, Stanford University).                Lubelcová (2011) stated that innovation can be called social innovation if it             is focused on the area of unmet social needs and unsolved problems. Another             criterion that determines social innovation is the manner of implementation:             social innovation is implemented on a cross-sectoral principle and a principle             of social partnership. The social impact of social innovation is reflected in the             outcomes and impacts it brings: social value brought by social innovations is","Chapter 5: Social innovations as future trend in nonprofit ...        111                distributed to society as a whole. The impact of social innovations on the whole             society also creates confidence from the users of services in the service provider             who implements the innovation. The main objective for social innovations is             achieving positive social change.                Mikušová Meričková (2014) recognized three basic forms of innovations that             provide solutions to social problems. These are:                 – support for local development;                 – transfer of technology development; and                 – initiation of an active approach to solving social problems by the marginal-                ized and low-income groups themselves.                One of the main features of social innovation is the involvement of local             citizens in solving the problems that occur in a given community and the use             of their knowledge and skills. CSI (Centre for Social Innovation) stated that             a social innovation is not always about new ideas, but about implementing ideas             that have already been successfully applied elsewhere, mostly in the fields of             education, health care, social services, and public policy decision-making pro-             cesses. Social innovations can spread through ideas, values, software, and tools,             but not all innovations take the form of a particular product or service. Social             innovations based on the amount of resources, including social capital, and their             impact can affect more areas of society. CSI defines social innovation as a link             between the public, private, and academic sectors, along with the linking of im-             aginative socio-economic activities, local knowledge, cross-sectoral cooperation,             and capacity development of cooperative networks.                In terms of innovation as an economic solution, there are interesting ap-             proaches to the delivery of public services. The works of Cullis \& Jones (1992),             as well as of other authors including Osborne \& Gaebler (1993), created an ef-             fective base for current approaches to „middle stream” public economics, using             terms such as „public governance”, „public-private-civil sector mix, partner-             ships, competition, and cooperation”, and „co-creation”. The basic principle of             these approaches is based on responding to two core questions:             1)  How can public services be produced?             2)  How can public services be funded?                 There is no simple answer to these questions that would be valid everywhere             all the time. In the 1980s, New Public Management presented some answers in             the form of contracting public services (Mikušová Meričková \& Nemec, 2013;             Mikušová Meričková \& Nemec \& Soukopová, 2014). Innovative answers to these             questions, intended to enhance public values such as effectiveness, efficiency,             and legitimacy, can be found through collaboration with different stakehold-             ers, delivering interesting social innovations (Bekkers et al, 2013). Innovation in             public services is possible in the environment of a new concept of government","112                           Nonprofit organizations in selected CEE countries ...                that is defined as the sum of interactions between cooperating actors from the             public and private sectors solving social problems (Osborne \& Brown, 2005). The             emphasis is on the citizens and on building a civil society (Pollitt \& Bouckaert,             2011). For innovation in the public sector to be successful, there must be consist-             ency between the character of the innovation and the environment where the in-             novation takes place. The innovation process requires legitimacy (Wilson, 1989),             political sustainability (Moore \& Hartley, 2008), strong democratic values (Bason,             2010), and respect for the needs of the citizens (Korteland \& Bekkers, 2008). In-             novation in the public sector is a social innovation that should bring economic             value as well as legal and democratic values to the provision of public services.                In relation to public services, innovation can be understood as developing             public services to better meet public needs by modifying the status of actors in the             system of public service provision (Mulgan \& Albury, 2003). These actors should             be willing and able to learn, to improve their work, and to cooperate with each             other (Von Hippel, 2007). The innovation of public services must meet the needs             of the public or the needs of society or a particular community whose members             are involved in the process of creating and implementing the innovation.                In social innovation, the production of public services is considered to be             an open process, with the end users involved in the design and development             of goods and services (Chesbrough, 2003; Silva \& Buček, 2014; Von Hippel,             2007); it is also considered to represent a change in the relationships between             the involved stakeholders (Bekkers et al, 2014). One of the central elements             in the concept of social innovation is the active participation of citizens and             grassroots organizations in order to produce social outcomes that really matter             (Bason, 2010, Sońta, 2010).                The participation of citizens in the development and subsequent implementa-             tion of an innovation is of great importance in terms of the success of the public             service innovation process (Borins, 2008; Fuglsang, 2008; Von Hippel, 2007).                Public service delivery that involves citizens, not only as consumers but also             as producers of services, can increase the scope of public services as well as             the quality of public services through perceived consumer satisfaction. This ap-             proach to public service delivery is described in modern public management             theories as „co-creation” (Voorberg, Tummers, Bekkers, 2013).                The participation of citizens, as the final consumers of public services, plays             a very important role in the innovation process. Innovation aims to create pub-             lic services following the needs of its consumers, the citizens. Therefore, the             direct participation of citizens in the innovation process and in introducing the             innovation into practice is of great importance in terms of the success of the in-             novation process (Borins, 2008; Fuglsang, 2008; Von Hippel, 2007). From this             point of view, we can speak of co-creation itself as a public service innovation             or a social innovation.","Chapter 5: Social innovations as future trend in nonprofit ...        113                   Co-creation is regarded as a promising concept against austerity, ageing, and             the eroding legitimacy of public institutions (Pestoff, 2014). There are three             types of co-creation (Von Hippel, 2007):             1)  co-initiation, in which citizens act as initiators;             2)  co-design, in which citizens are invited to co-design; and             3)  co-implementation, in which citizens are invited to implement public ser-                vices (instead of public organizations).                 According to Sørensen and Torfing (2011), public innovation takes place             through collaboration with different stakeholders. As a result, innovation is al-             ways relative to its context. This consists of elements such as the political and             administrative context, the legal culture within the public sector, state govern-             ance and civil service tradition, and resource allocation and resource depend-             ency (Bekkers et al, 2014).                According to theories of decentralization (Bailey, 1999), local governments             that are closer to the citizens are expected to serve local needs. This should             mean that in the area of social innovations, local self-governments are the level             at which a lot of co-creative innovations occur (Hsieh \& Fu, 2014). Co-creation             usually happens when citizens are invited to initiate and design public projects             or services with local governments and public organizations to solve social prob-             lems and unmet needs. But what if citizens are not used to participating in such             projects? What if they are not used to participating at all? In Slovakia and the             Czech Republic, historical state and governance traditions greatly influenced             the process of co-creation. The communist political power dominance over all             subsystems of public administration and a strong centralized state did not sup-             port the involvement of citizens in policymaking. After the fall of communism             in 1989 and the split of Czechoslovakia into two independent countries in 1993,             the nonprofit sector started to bloom in Slovakia and the Czech Republic. This             opened the opportunity for citizens to group and to express their opinions on             public affairs. Several research projects have proved that nonprofit sector organi-             zations, mostly civic associations, initiated co-creation and social innovations             projects. They supported citizens in participation and built an active citizenship             (see following chapter 4.7 Social Innovations in Public Services in Slovakia).                There is a risk that the de-monopolization of public services and alternative             service arrangements with NGOs as service producers are perceived by public             officers as a threat (based on an organization’s experience negotiating with an             authorized government representative for civil society). This puts NGOs in an             unfavorable light in the government view. But co-creation should not be seen as             a „total solution” replacing existing services; instead, co-creation initiatives should             be considered as alternatives for existing public services or as additional services.","114                           Nonprofit organizations in selected CEE countries ...               5.2.1. Social innovations in public services in Slovakia                 The case studies presented in this chapter were part of the „Learning from In-             novation in Public Sector Environments” (LIPSE) research project, studying the             drivers and barriers to successful social innovation in the public sector. In these             case studies, we focused on the participation of different stakeholders in public             service provision at the level of local self-governments and on different types             of co-creation, including the relevant drivers and barriers that account for the             success or failure of co-creation processes in two fields: welfare and the environ-             ment. We used qualitative methods to analyze co-creation during innovation in             public services provision. To develop an inventory of relevant practices in which             citizens or other stakeholders are involved, we conducted an extensive analysis             of relevant policy documents, databases, and websites. We also conducted more             than ten expert interviews, leading to the compilation of ten case studies. There             are five examples of co-creation in the welfare sector and five cases in the envi-             ronmental sector, summarized in table 36.                The purpose of the first part of our analysis was to create a list of eligible             cases within the public welfare policy sector and within the rural/urban regen-             eration policy sector that could be compared to each other. We followed three             main selection criteria when identifying eligible cases:             1.  Citizens were involved as co-designers or initiators: From a systematic review                of the literature on co-creation and co-production within the public sector,                we concluded that three different types of citizen involvement can be distin-                guished: citizens as co-implementers, citizens as co-designers, and citizens                as initiators. Since we are interested in co-creation during social innovation                processes, we focused our research on the involvement of citizens as initia-                tors and co-designers. Thus, within the selected cases, citizens were involved                at least at the start of the co-created initiative.              2.  Cases are from the public welfare or rural/urban regeneration policy sectors:                We conducted our research in two different policy sectors: the welfare sector                and the rural/urban regeneration sector (environment). Innovations within                the welfare sector were aimed at improvements within the social infrastruc-                ture, including innovations aimed at a specific target group (the elderly,                juveniles, immigrants, etc.). Within the rural/urban regeneration sector, we                focused on innovations within the physical infrastructure. In these cases, in-                novations were primarily aimed at improving the livability of neighborhoods,                for example through housing or the (re)decoration of public spaces. By urban                regeneration, we mean (topographical) areas that have to deal with a chang-                ing population due to social and economic developments (e.g. a growing                number of elderly citizens).","Chapter 5: Social innovations as future trend in nonprofit ...        115                Table 36. List of cases of co-creation at the local government level                   Case         Goal of co-created initiative  Main actors/stakeholders              1. Conciliation   Help citizens to solve any kind of  Citizens, NGO PDCS, C.S. Mott Foun-              councils       conflicts, especially ethnic conflicts dation, municipalities in given areas              2. Kojatice Social  Provide social housing for Roma  University students, Roma citizens,              Housing        with a certain maintenance guaran- local self-government and its mayor,                             tee thanks to Roma co-financing and  NGO ETP Slovakia                             co-building              3. Godmothers  Provide material and non-material  NGO „Sanca pre nechcenych”, SPP                             support to young mothers in social  Foundation, VUB Foundation, Or-                             need for inclusion in the society  ange foundation, municipalities that                                                          decided to support the project              4. Electronic    Improve the lives of elderly disabled  Involved local governments, private              Guard          citizens with telecare and related as- IT company YMS, private telecom-                             sistive technologies         munication company Orange              5. Martin      Improve lives for elderly citizens by  Municipality of Martin, several citi-              Relaxation Path  building an accessible public relaxa- zen initiatives (Joga v dennom živote,                             tion infrastructure – nature path   DIAMART – club of people with                                                          diabetes, and the Martin Pensioners                                                          Club)              6. „Green Patrol”   Increase citizen participation and  „Green Patrol” citizen initiative, mu-              in Bratislava  responsibility for clean green areas,  nicipality of Bratislava and its local                             better quality urban environment  parts, inhabitants of Bratislava              7. „Green Patrol”  Improve and maintain the quality  „Green Patrol” citizen initiative, mu-              Interactive Portal of the urban environment, improve  nicipality of Bratislava, citizens in the                             collaboration among citizens, par- social network                             ticipating organizations, and the city              8. Trash Out   Improve the physical environment  Involved local governments, envi-                             and collaborate among all sectors  ronmental NGOs (Greenpeace, Let’s                                                          Do It, Enviweb cz, Emerald Planet,                                                          Priatelia zeme, Greenoffice sk), waste                                                          management companies, Ministry of                                                          Environment of Slovakia and the en-                                                          vironmental fund of Slovakia              9. Mobile City  Facilitate citizen participation and  Private company Datalan, a.s, munic-                             improve the physical environment  ipalities in Bratislava’s self-governing                                                          region and their inhabitants              10. PrieStory   Complete low-cost physical infrastruc- Ekopolis Foundation, citizens, partici-                             ture investment projects executed by  pating municipalities, CSOB bank, lo-                             volunteers living in the area, improve  cal companies (as sponsors providing                             collaboration among sectors  additional funding)             Source: Nemec, J., Mikušová Meričková, B., Svidroňová, M. 2015.","116                           Nonprofit organizations in selected CEE countries ...                3.  Possibility of specifying the outcomes of co-creation processes: The kinds                of outcomes co-creation processes have in social innovation are relatively                unknown. In order to draw some conclusions about these outcomes, the                selected cases needed to involve co-created initiatives that are no longer in                their initial phase but have in fact delivered some results.                Based on an analysis of the investigated cases, we summarized the roles of             the different participating actors in co-creation based innovations (table 37). We             captured their roles in three different stages based on the three different types of             co-creation defined above: Initiation (marked as 1 in the table 37), Design (2),             and Implementation (3).               Table 37. The role of different actors in co-creation based initiatives in different stages                      of the co-creation                   Role    Citizen initiative(s) Formalized NGOs  Private sector  Local government              Project        1   2    3    1    2    3    1     2    3    1    2    3              Conciliation   Yes  Yes  Yes  Yes  Yes  Yes  No  Yes  Yes  No   No  Partly              councils              Kojatice      Yes  Yes  Yes  Yes  Yes  Yes  No   No   No  Partly Partly  Yes              Godmothers    Yes  Yes  Yes  Yes  Yes  Yes  No   No   Yes  No   No  Partly              Electronic Guard No  Yes  No  No  No   No   Yes  Yes  Yes  No   Yes  Partly              Martin        Yes  Yes  Yes  Yes  Yes  Yes  No   No   No   No   Yes  Yes              Relaxation Path              Green Patrol BA  Yes  Yes  Yes  No  No  No  No   No   No   No   No  Partly              GP Interactive   Yes  Yes  Yes  No  No  No  No   No   No   No   No  Partly              Portal              Trash Out     No  Yes  Yes   No   Yes  Yes  Yes  Yes  Yes  No   Yes  Partly              City Mobility  No  No  Partly  No  No  No   Yes  Yes  Yes  No   Yes  Partly              PrieStory     No  Yes  Yes   Yes  Yes  Yes  No   No  Partly Partly  No  Partly             Source: Nemec, J., Mikušová Meričková, B., Svidroňová, M. 2015.                  Figure 27 demonstrates that from the list of analyzed cases, none of the local             governments fully participated in the initiation of co-creation; only two munici-             palities were even partly involved. In the design stage, the situation is similar             although slightly better; at least half of the municipalities participated in the co-             design of an innovative public service solution either fully (four municipalities)             or partly (one municipality). In the implementation of social innovation, two             local governments participated fully and eight were partly involved.                Interviews with representatives of the involved actors/stakeholders revealed             that „participating” municipalities usually stated that they were not aware of the             project we were investigating, even though we found information about their             participation in the documents or on the websites.","Chapter 5: Social innovations as future trend in nonprofit ...        117                   The answer „partly” in the table means that of the many local governments             contacted, only a few participated in the co-creation process, or that their in-             volvement during the project’s completion phase changed from positive to indif-             ferent or negative. Data collected in our comprehensive research study indicates             that local governments usually do not initiate co-creation and are not very active             in the design and implementation phases. Figure 27 illustrates this more clearly.                90%                                           No   Partly  Yes                      80%                                                 80%              80%              70%               60%                                             50%              50%                                                         40%              40%               30%                            20%                                                 20%              20%                                                   10%              10%                                   0%                               0%               0%                           Initiation             Design               Implementation             Figure 27. Participation of local governments in co-creation in Slovakia             Source: Nemec, J., Mikušová Meričková, B., Svidroňová, M. 2015.                  We feel the core problem lies in the very limited interest of municipalities in             participating in activities proposed and designed by other partners/actors. The ac-             tors who initiate co-creation in Slovakia can be divided into two types: the private             sector and formal or informal third-sector structures (NGOs or citizens). NGOs,             as formalized structures of citizens, have a rather strong position in co-created             initiatives; further research should be done in this area (Kuvíková \& Vaceková,             2009, Nemec in Osborne, 2008; Svidroňová \& Vaceková, 2012). The private sector             is active especially in the area of information technologies, as the implementation             of co-created initiatives in that field also improves their sales and profit.                Despite existing research from other countries (Bekkers et al, 2014) indicat-             ing that, among other factors, local governments are expected to use the quality             of their services as a competitive advantage in order to attract citizens, this does","118                           Nonprofit organizations in selected CEE countries ...                not work in Slovakia. As Veselý (2013) stated, accountability and responsibility             are not very well developed characteristics of good governance at any level of             government in Central and Eastern Europe. This fact, combined with lingering             habits from the communist era, may explain the behavior of local self-govern-             ments in Slovakia. The values and principles of local politicians and bureaucrats             are still influenced by the socialist understanding of the state at every level, na-             tional and local, as a „ruler” and not as a „servant” (see also Bunčak et al, 2008).                For many local politicians and bureaucrats, co-creation is not perceived as             innovation or progress but as a burden, especially if it reveals some existing             flaws in the system in which local governments function and in the ways they             are organized. This seems to be the most important barrier, accounting for the             failed co-creation processes at the local government level in Slovakia.                Based on the investigated cases in table 36, we can state that the role of local             self-government in co-creation in Slovakia is rather limited; service delivery in-             novations are predominantly initiated by third-party organizations or citizens             themselves.                The cause of this situation might be the traditions and types of governance             inherited from Slovakia’s socialist past, and it cannot be changed immediately.             Even in developed countries, both bureaucrats and elected politicians who make             decisions about innovations in the public sector tend to reject risk (Osborne \&             Brown, 2005); political thinking does not match economic thinking (Mulgan \&             Albury, 2003), and another problem facing the implementation of the innovation             process is the short political cycle (Borins, 2008). In Slovakia, the limited will             of local governments to innovate service delivery modes is also connected with             a lack of responsibility and accountability. The dominant rather conservative ap-             proach is not a consequence of the legal and financial status of municipalities in             the country: in Slovakia the local self-government law almost fully respects all             the principles of the European Charter for Local Self-Government, and munici-             palities are legally and financially viable institutions (Flaška et al, 2014). In this             situation, in which the type of governance and the governance traditions nega-             tively influence the innovation process, short-term measures have very limited             chances of changing the limited will of municipalities to develop and support             co-creation. A possible solution seems to be in long-term changes based on             changes in the roles of participating actors. Citizens should change from passive             consumers of public services (in whatever quality and/or quantity) to active             subjects of local and national democracy, and politicians and bureaucrats need             to change from „rulers” to real policy makers and service delivery institutions.                The list of cases in table 36 suggests several interesting co-created innovation             initiatives in Slovakia at the local government level. We present two selected case             studies: Kojatice Social Housing and the PrieStory Program (in bold in table 36).","Chapter 5: Social innovations as future trend in nonprofit ...        119               5.2.2. PrieStory Program                 We would like to draw attention to a positive case in which municipalities             were interested in innovation and participated in the co-creation process. The             impulse for this particular co-created initiative was absent and/or insufficient             public facilities. The co-creation in the PrieStory program was inspired by the             approach used by Nadace Partnerstvi (Partnerstvi Foundation) in the Czech             Republic, which itself used the experiences of the US nonprofit organization             Project for Public Spaces.                The PrieStory program involves the providers of a public service (munici-             palities/local governments), the co-designers of the public service (citizens),             the public service innovation initiators (Ekopolis Foundation and Partners for             Democratic Change Slovakia PDCS – NGO), and the public service innovation             co-financer (CSO Bank – a private corporation). These relevant actors were             identified by analyzing policy documents and by interviewing the initiators of             the co-creation process – Ekopolis Foundation.                The co-creation process in this program has several important milestones:             1.  Establishing local partnerships (approximately one month)             2.  Preparation of planning (approximately two months)             3.  First planning meeting (one weekend meeting)             4.  Evaluation of the outcomes of the planning meeting and architectural design                of the place (max. two months)             5.  Second planning meeting (one-day meeting)             6.  Construction of the new public space with the participation of volunteers                (approximately three months)             7.  Opening event of the new public space (one day)                 The maximum duration of the program cycle is 12 months, within which all             the steps and events have to be implemented.                The PrieStory program fully meets our eligibility criteria for co-creation in             public service:             A) Citizens are involved as co-designers: In this public service innovation, citi-                zens and governmental organizations participated, and NGOs and private or-                ganizations are also involved, because of their specific resources and/or skills.                We refer to this multitude of actors as a collaborative innovation network.             B) The case involves examples of co-creation in rural/urban regeneration: In-                novation within the physical infrastructure is primarily aimed at improving                the livability of neighborhoods by innovations in housing or in the (re)deco-                ration of public spaces.             C) The case produced results in order to enable the examination of the effects                of co-created initiatives.","120                           Nonprofit organizations in selected CEE countries ...                   The PrieStory program aims to involve people in improving the living envi-             ronment, to increase public participation (which is one of the trends in public             service delivery), and to strengthen the community. The program is implement-             ed as an open competition where community groups are eligible to apply for             grant and technical assistance. The role of the Ekopolis Foundation as public             service innovation initiator is to provide financial and technical support.                To obtain the necessary information for the analysis, we conducted an in-             terview with all types of involved stakeholders. The semi-structured interview             protocol contained both open (inductive) and closed (deductive) questions; its             objective was to scientifically study co-creation during social innovation. The             questionnaire consisted of these parts: a description of the co-creation initiative;             influential factors to the co-creation process; outcomes of the co-creation pro-             cess; and space for respondents to express their opinions on anything relevant             which was not covered in the questions. The interviews were conducted person-             ally with all the above-mentioned stakeholders, who were promised anonymity             and can be identified only as:                • PrieStory program manager 1 (Ekopolis NGO, the co-creation in public ser-                vice delivery initiator and the co-financer of projects)                • PrieStory program manager 2 (Ekopolis NGO, the co-creation in public ser-                vice delivery initiator and the co-financer of projects)                • Regional public library in Žilina representative 1 (co-creation project initia-                tor, co-designer, co-producer of new public space)                • Regional public library in Žilina representative 2 (co-creation project initia-                tor, co-designer, co-producer of new public space)                • Local self-government representative in Handlová (co-creation project initia-                tor, co-designer, co-producer of new public space)                • Local self-government representative in Pohorelá (co-creation project initia-                tor, co-designer, co-producer of new public space)                • Local citizen group representative in Handlová (co-creation project initiator,                co-designer, co-producer of new public space)                • Citizen volunteer association Tilia representative in Rajec (co-creation pro-                ject initiator, co-designer, co-producer of new public space)                • Citizen 1 as the public service co-producer of the new public space                • Citizen 2 as the public service co-producer of the new public space                • Citizen 3 as the public service co-producer of the new public space                The notion of public value becomes less tangible when public services are             provided only by the public sector. In co-creation, the importance of the notion             of value can be seen by looking at the private-sector origins of co-creation. Pub-             lic service innovation needs to follow the logic of consequence and the logic of             appropriateness. In the logic of consequence, value refers to the level of rational","Chapter 5: Social innovations as future trend in nonprofit ...        121                accomplishments of a specific intervention, such as the quantity of output, quality             of output, formal effectiveness, efficiency, and citizen satisfaction. Table 38 shows             the first five effects in terms of the logic of consequence and the next six effects             in terms of the logic of appropriateness, as illustrated by the PrieStory program.               Table 38. Schematic display of co-creation effects (PrieStory program)              1. Quantity of output   Between 2005 and 2011, 33 public spaces were redesigned.              2. Quality of output  The quality of public spaces increased (citizens as the co-designers                                   were more satisfied with the service than before the co-created                                   initiative).              3. Formal effectiveness   Absent public facilities were provided and citizen needs were better                                   addressed.              4. Efficiency        Public facilities were provided in the least expensive way in term of                                   public finances. Between 2005 and 2011, more than €174,000 was                                   assigned through the Ekopolis Foundation; much more was given                                   in terms of volunteer work, which is hard to measure and express in                                   financial value; other donations came from the private sector, both                                   financial and non-financial (i.e. material, know-how, etc.).              5. Customer satisfaction By involving the citizens as co-designers, their needs were taken                                   into consideration. As volunteers, the citizens played a vital role in                                   the co-creation process, which led to greater satisfaction with the                                   provided public facilities.              6. Accountability    A co-created initiative clarified who was accountable for what part                                   of the service.              7. Equity            Co-creation led to a more equal distribution of public services.              8. Responsiveness    Public spaces were better able to meet citizen needs and criteria.              9. Fairness          Co-creation led to a more fair distribution of public services.              10. Trust            Trust in the public institutions increased.              11. Public Participation Public participation was increased.             Source: Mikušová Meričková, B., Svidroňová, M., 2014.                  Table 39 shows the effects in terms of the logic of consequence and in terms             of the logic of appropriateness, as seen by interviewees who expressed their             opinions of whether the target outcomes were reached.                The co-creation in the PrieStory program produced more efficient and more             effective public service delivery in a rural/regeneration sector. The demands on             the municipal budget decreased and citizen participation increased. In general,             the co-created initiative had a positive impact on public service delivery in term             of effectiveness, efficiency, and equity. Thus this case could serve as a strong             motivator for other municipalities to join co-created initiatives.","122                           Nonprofit organizations in selected CEE countries ...                         Trust  Don’t   know  Don’t   know  Don’t   know  Don’t   know  Yes   Yes   Yes   No  Don’t   know  Don’t   know  Don’t   know                      Fairness  No   No  No   No    Don’t   know  Yes  No  Yes  No  Don’t   know  Don’t   know                    Logic of Appropriateness  Respon-  Increased   siveness  Equity  Don’t   No   know  Don’t   No  know  Yes  No  Yes  No  Don’t   Yes   know  Yes  Yes  Yes  No  Don’t   Yes  know  Yes  No  Don’t   Yes  know  Don’t   Yes  know                        Table 39. Evaluation of target outcomes per stakeholder per value (PrieStory program)                    Increased   Accountability  No  No  Don’t know  No  Yes   Yes   Yes  Yes   Yes  No  Don’t know                         Satisfaction  Yes  Yes  Yes  Yes  Yes  Yes  Yes  Yes  Yes  Yes  Yes                     Logic of Consequence  Effective-  Efficiency  ness  Don’t   Yes  know  Don’t   Yes  know  Yes   Yes  Yes  Yes   Don’t   Yes   know  Yes  Yes  Yes   Yes   Yes   Yes   Don’t   Don’t   know  know  Don’t   Yes  know  Don’t   Don’t   know  know                            Concrete   products  Yes  Yes  Yes  Yes  Yes  Yes  Yes  Yes  Yes  Yes  Yes                           PrieStory program manager 1 (Ekopolis NGO,   PrieStory program manager 2 (Ekopolis NGO,   Regional public library in Žilina representative   Regional public library in Žilina representative   lová (co-creation project initiator, co-designer,   Source: Mikušová Meričková, B. 2015. LIPSE report.                          Respondent/value  the co-creation in public service delivery  initiator and the co-financer of projects)  the co-creation in public service delivery  initiator and the co-financer of projects)  1 (co-creation project initiator, co-designer,  co-producer of new public space)  2 (co-creation project initiator, co-designer,  co-producer of new public space) Local s","Chapter 5: Social innovations as future trend in nonprofit ...        123                   In the analysis, based on interviews, we identified some relevant drivers of             the co-creation processes in the PrieStory program at the local government level:             1)  A co-creation network was established with key stakeholders to secure their                material, organizational, and financial support during the planning and im-                plementation phases; this could be successfully accomplished without the                support of local politicians and bureaucrats.             2)  Citizens were involved through the local media, posters, and mainly public                meetings led by an experienced facilitator to help to gain mutual agreement                about the preferred purposes of the public service innovation.             3)  Clear incentives and use of the abilities and skills of the citizens (volunteers)                in the co-production of the public service strengthened the local community                and the citizen awareness of public values.               5.2.3. Kojatice Social Housing                Social housing in Kojatice is the fulfillment of a mission of the Slovak citizen             association People in Need (www.peopleinneed.sk) dealing with social cohesion,             humanitarian aid, and human rights protection. One of its programs focuses             on housing for people dependent on social assistance. Some of the volunteers             in this organization study architecture. They came up with the idea of building             social houses for marginalized groups of citizens. No specific event sparked this             initiative; it was just the idea of a small group of people for responding to the             long-term need to support vulnerable groups of citizens. Formally, the social             protection of vulnerable groups is the responsibility of the central government             and of self-governments; however, their protection is insufficient, so the in-             volvement of the civic sector is necessary. The problem addressed is the very             low standard of housing for Roma citizens, which is the responsibility of local             self-governments (housing is the responsibility of local self-governments as set             by the Municipal Law). The central government and the Government Appoin-             tee for National Minorities have shown formal interest in this issue, but have             limited opportunities to act. In this concrete case, the comprehensive central             government’s Roma policy and the municipal law established the obligation             to support social housing from municipal budgets. However, these two pillars             are not strong enough to respond to the really poor housing situation of Roma             in Slovakia. Especially with cuts in public funding, the local self-governments             lack sufficient resources to finance social housing for any group of citizens with             social needs, meaning that their ability to solve the housing situation for Roma             citizens is rather limited.                The main principle of the project is an individual approach and personal             commitment of initiators and inhabitants. People involved in the project par-             ticipated in the whole process: architects in communication with Roma citi-","124                           Nonprofit organizations in selected CEE countries ...                zens created plans and technical documentation for the construction of houses             based on the citizens’ requirements and ideas; later, the citizens were trained in             construction work, and for one year they saved money in a joint fund. In the             forthcoming years, they will be involved in a microcredit system through which             they will pay off the materials needed for building their houses. The total cost of             one house is around €10,000, two thirds of which is provided by NGOs and the             municipality (the municipality provides land and a small amount of funding);             the rest is paid by the Roma citizens. The reason for the microcredit system is             that Roma citizens have no chance to get an ordinary loan from a bank; the mi-             crocredit system is their only option. This system provides an interest-free loan             between €1,000 and €1,400 to finance the construction of the houses. The loan             comes with some training, including training in construction work that covers             the basic of house building as well as what materials to use, how to save energy,             etc. There is also training focused on financial literacy, so the Roma citizens             would be able to pay off the loans. A very important part of the microcredit             system is to motivate people and work with them on a regular basis.                Based on the description of this co-creation based initiative, it fulfills all of the             eligibility criteria for co-creation in public service. We followed a survey proto-             col, as we did with the PrieStory program. We analyzed the extent to which co-             creation was beneficial by comparing the interview results for these stakeholders:                • The initiators from the Faculty of Architecture, Comenius University Brati-                slava, who volunteered. Students initiated the co-creation as a part of their                affordable housing research; they planned the houses based on the needs and                abilities of the Roma citizens.                • The municipality of Kojatice and its mayor. The municipality provided some                funding and the land for the housing (otherwise, building the houses on                these premises would have been illegal).                • The housing inhabitants. The Roma citizens contributed to a common fund                to partially finance the building of the houses and mostly they volunteered                at the building site.                • Other actors (NGOs such as ETP and Pontis Foundation). These NGOs                helped with funding and with setting up the micro-loan program.                The preparation for the social housing project started in 2005. It was very im-             portant to build up relationships with social workers and subsequently through             them with the Roma citizens because of a high level of distrust between Roma             citizens and the majority. The project itself started in 2011; the first houses were             finished in the summer of 2013. The rest of the social houses are expected to be             finished in 2015 and 2016. The involvement of the Roma citizens in building the             new houses and financing their costs are important guarantees that the houses             will be better maintained. There are eight Roma families involved in the project,             and they may serve an inspiration to others.","Chapter 5: Social innovations as future trend in nonprofit ...        125                   This concrete situation, where Roma people live in really poor conditions (15             or 20 people living in one small derelict house without electricity, water, or sew-             age), appealed to the volunteers in the civic association. Because they were archi-             tecture students, obliged to deliver a practical project as part of their final exams,             the idea arose of helping to improve the poor living standards in the dilapidated             homes of Roma citizens in the east of Slovakia. According to the initiator (an             NGO volunteer who was an architecture student), the goal was to build houses             for Roma citizens who live in very poor social conditions. The main idea was to             provide them with affordable housing with a minimum of support from the state,             government, or other parties – and to motivate them to participate directly in             building and financing their houses. The results are small simple houses financed             by various sources (diversification of funding, multisourcing). According to one             interviewed volunteer, the acceptable housing, the work experience when helping             to build the house, and the partial financial responsibility were impetuses for posi-             tive changes in the Roma citizens’ lifestyle. These changes made it easier to devel-             op in other areas: quality housing meant less time was required for maintenance             and better health, the increased sense of responsibility improved children’s school             attendance, and the new work experience improved the chances for employment.                Table 40 shows the first four effects in terms of the logic of consequence and             the next five effects in terms of the logic of appropriateness, as seen by individual             stakeholders who were asked whether the planned outcomes were achieved.               Table 40. Evaluation of outcomes per stakeholder per value (Kojatice case)                             Logic of Consequence           Logic of Appropriateness              Respondent / Concrete  Effecti- Effi-  Satisfac-  Increased   Increased  Respon-  Fairness Trust              value     products eness ciency  tion  accounta-bility  equity  siveness              Initiator 1  Yes   Yes   Yes   Yes      Yes      Yes     Yes   Yes   Yes              Initiator 2  Yes   Yes   Yes   Yes      Yes      Yes     Yes   Yes   Yes              Professional            Don’t                           Don’t              1 (mayor)   Yes    Yes  know   Yes      Yes      Yes    know   Yes   Yes              Professional   Yes  Yes  Yes   Yes   Don’t know  No      Yes   Don’t  Don’t              2 (NGO)                                                        know  know              Roma                    Don’t              inhabitant 1  Yes  Yes  know   Yes   Don’t know  Yes     Yes   Yes   Yes              Roma                                                                Don’t              inhabitant 2  Yes  Yes   Yes   Yes   Don’t know  Yes     Yes   Yes  know              Roma        Yes    Yes  Don’t   Yes     Yes      Yes     Yes   Yes  Don’t              inhabitant 3            know                                        know              Roma                                                                Don’t              inhabitant 4  Yes  Yes   Yes   Yes   Don’t know  Yes     Yes   Yes  know              Non-Roma    Yes    Yes   Yes  Don’t   Don’t know  Yes    Yes   No    No              inhabitant 1                  know              Non-Roma    Yes    Yes   Yes  Don’t   Don’t know  Yes   Don’t   No  Don’t              inhabitant 2                  know                      know        know             Source: Nemec, J., Svidroňová, M. 2015","126                           Nonprofit organizations in selected CEE countries ...                   Some outcomes were evaluated as improved or reached by all stakehold-             ers, including concrete products (quantity of output) and effectiveness. Other             outcomes were mostly marked as achieved, although in several cases the stake-             holders were not able to express their opinions. This happened mostly when             the Roma inhabitants were interviewed and the questions were too complicated             for them. Despite the effort of the researchers to explain the question, these             stakeholders were not able to answer some questions. There were negative re-             sponses for a few outcomes, e.g. the NGO that provided the microcredit system             did not think that the equity was increased by this co-creation initiative, and             a non-Roma inhabitant thought that the project was unfair because there are no             incentives to help build new houses for the majority and that all help is directed             towards Roma citizens.                The outcomes of the Kojatice Social Housing are summarized in table 41.               Table 41. Schematic display of co-creation outcomes (Kojatice case)              1. Quantity of output   Between 2005 and 2014, seven houses were built              2. Quality of output  The quality of the housing was increased              3. Formal effectiveness   Housing services were provided and citizen needs were better                                   addressed              4. Efficiency        Housing was provided in the least expensive way in terms of pub-                                   lic finances              5. Customer satisfaction  By involving the citizens as co-designers, their needs were taken                                   into consideration (planning with architects)              6. Accountability    A co-created initiative clarified who is accountable for what part                                   of the service              7. Equity            Co-creation led to a more equal distribution of public services              8. Responsiveness    Social housing able to meet citizen needs and criteria better              9. Fairness          Co-creation led to a more fair distribution of public services              10. Trust            Trust in the public institution was increased              11. Public Participation  Public participation was increased             Source: Nemec, J., Svidroňová, M., 2015                 The co-creation in the Kojatice Social Housing project brought more efficient             and more effective public service delivery in the welfare sector, specifically in             social housing. The demands on the municipal budget decreased and citizen             participation increased. In general, the co-created initiative had a positive im-             pact on public service delivery in terms of effectiveness, efficiency, and equity.             This case could be serve as a positive example for other municipalities to join             co-created initiatives, especially to help solve the housing of poor citizens.","Chapter 5: Social innovations as future trend in nonprofit ...        127                   In general, the public sector in Slovakia has a very low interest in innova-             tions in public services provision (see Innovation indexes and for example Mur-             gasova, 2014; Kožiak \& Suchý, 2014). In such a situation, the nonprofit sector             (civic sector) is more often the source for social innovations (Kuvíková \& Va-             ceková, 2009), especially in rural areas (Valentinov \& Vaceková, 2015). All of             the respondents were positive in their evaluation of the outcomes. The core out-             come was an improved standard and style of living for the Roma citizens, who             learned active participation, developed manual skills by building their houses,             and attained basic education in financial literacy, opportunities that the Roma             respondents appreciated.                From the point of view of the municipality, the co-creation process improved             the delivery of its own public service. The mayor stated that the municipality is             obliged by law to provide housing for its citizens, but it is not in their capacity to             do so with their very limited public sources. The social housing project helped             provide housing with lower costs and minimal burden to the public budget.             Other outcomes were improved public space, improved image of the munici-             pality, improved social relations in the region, and new forms of co-operation             between different NGOs and other stakeholders (i.e. better use of social capital).             The impact of this project in terms of social relations within the municipality             was twofold, according to the mayor and non-Roma inhabitants:                The Roma population appreciated the project and it increased their trust in             the mayor;                Non-Roma inhabitants were glad for the improved public space (better             standard of life for the whole village) and that they were able to see that Roma             citizens are ready to work if they are motivated (the opinion that Roma people             are just lazy, passive recipients of social help with frequent criminality is a very             common prejudice in Slovakia), but they also complained that the mayor helped             only one group.                The issue of personal responsibility for the Roma citizens is interesting. They             were trained in financial literacy and some other skills; however, their way of             thinking is still influenced by the past (comprehensive welfare regime of social-             ism). The opinion of the interviewed professionals was that the personal respon-             sibility of the Roma population improved, but on a limited scale.                All in all, the extent of the co-creation was beneficial to all stakeholders, and             especially for the Roma citizens, through the provision of the public service of             housing, and through education and training and the chance to integrate within             the society.","","SUMMaRY                     The concept of sustainability started to be used in the early 1970s, especially             in the connection with recognition that any uncontrolled growth (population,             production, consumption, pollution, etc.) is unsustainable in an environment             of limited resources. The sustainability issue involves a discourse on the utiliza-             tion of an organization’s capacity to fulfill its mission in the most effective way.             Long-term sustainability of nonprofit organizations enables the fulfillment of their             mission for the longest possible time. In other words, the sustainability of a non-             profit organization means that it operates continuously as long as possible in its             marketplace. It also means not exceeding the limits of the ecological, social, and             economic stability of the environment.                Achieving the sustainability of nongovernmental nonprofit organizations has             many dimensions and includes internal factors, such as the growth and capacity of             the organization and the readiness to seize the opportunities, as well as the exter-             nal factors, such as securing resources and support from the external and legisla-             tive environment. This scientific monograph showed the journey to sustainability             for organizations operating within the nonprofit sector and social economy. The             authors indicated the roles and positions of nongovernmental nonprofit organiza-             tions in the national economy in selected CEE countries. The presented research             focused on economic theories of nongovernmental nonprofit organizations, on             the historical development of nongovernmental nonprofit sector, on funding and             commercialization of nongovernmental nonprofit organizations, and on the role             of nonprofits as the carriers of social innovations. Each chapter concluded with             empirical evidence from selected CEE countries; based on the stage of research,             the authors provided data analysis supporting theoretical approaches in Slovakia,             the Czech Republic, Austria, or even in all three countries.                Nongovernmental nonprofit organizations and the issue of their sustainability             have received increasing attention in the scientific literature worldwide. However,             a comprehensive picture of the nonprofit sector and sustainability-related issues             based on primary research focused on selected CEE countries is missing. The lack             of relevant literature shows a considerable research gap that strongly indicates             the need for deeper insight. The monograph contributed to the scientific body of","130                           Nonprofit organizations in selected CEE countries ...                knowledge by providing a comprehensive picture of challenges to and opportu-             nities for nonprofit organizations in the specific historical, socio-economic, and             political conditions of the Czech Republic, Slovakia, and Austria. 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Share of the respondents by the size of municipality in which                        they operate .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  39             Figure . 6 .  Legal form of the respondents  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  39             Figure . 7 .  Age of the respondents (how long they operated in the non-                        profit sector)   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  40             Figure . 8 .  Reported activities of the responding nonprofit organizations .   .  42             Figure . 9 .  The core work of Austrian NGOs by ICNPO .   .   .   .   .   .   .   .   .  57             Figure . 10 . Composition of the staff in the Austrian NGO  .   .   .   .   .   .   .   .  57             Figure . 11 . Nonprofit incomes vs. commercial incomes   .   .   .   .   .   .   .   .   .  60             Figure . 12 . The structure of resources of large civic associations from                        2008 to 2012 per unit .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  77             Figure . 13 . The structure of resources of large nonprofit providers of                        public services from 2008 to 2012 per unit .   .   .   .   .   .   .   .   .   .  77             Figure . 14 . The structure of resources of large foundations from 2008 to                        2012 per unit  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  78             Figure . 15 . Controlling structure .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  84             Figure . 16 . State of utilization of financial controlling in nonprofit sector                        organizations  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  86             Figure . 17 . Reasons for implementing financial controlling .   .   .   .   .   .   .   .  88             Figure . 18 . Person responsible for utilizing financial controlling                        and its tools .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  91","146                           Nonprofit organizations in selected CEE countries ...                Figure . 19 . The utilization of financial controlling tools in Nongovern-                        mental Organizations.   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  92             Figure . 20 . The utilization of financial controlling tools in governmental                        nonprofit organizations .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  93             Figure . 21 . Interest of nonprofit organizations in implementing financial                        controlling  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  94             Figure . 22 . Number of social enterprises    .   .   .   .   .   .   .   .   .   .   .   .   .   .    103             Figure . 23 . Social enterprises according to their legal form .   .   .   .   .   .   .   103             Figure . 24 . Social enterprises according to their social beneficial effects   .    104             Figure . 25 . Overview of the legal forms of active social enterprises in                        Slovakia   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    106             Figure . 26 . Overview of the economic activity of the active social enter-                        prises in Slovakia   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    107             Figure . 27 . Participation of local governments in co-creation in Slovakia .   115","List of tabLes                 Table 1 .  Type of nongovernmental organizations fulfilling structural/op-                      erational definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13             Table 2 .  Theories of the nonprofit sector . . . . . . . . . . . . . . . . . . . . . . 14             Table 3 .  Comparison of social economy and nongovernmental nonprofit                      sector characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19             Table 4 .  Differences in the thinking of profit-making and nonprofit subjects  . 23             Table 5 .  Subjects of social economy   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 26             Table 6 .  Precursors of social entrepreneurship in the nonprofit sector . . . . . 33             Table 7 .  Precursors of social entrepreneurship in the private sector  .  .  .  .  .  . 34             Table 8 .  Key events in the field of social entrepreneurship in Europe.  .  .  .  .  . 34             Table 9 .  Key events in the field of social entrepreneurship in the Czech                      Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35             Table 10 . Key events in the field of social entrepreneurship in Slovakia . . . . . 36             Table 11 . Location of the nonprofit organizations by region  .  .  .  .  .  .  .  .  .  .  . 38             Table 12 . Overview of full-time and part-time employees and volunteers in                      respondents’ organizations   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 40             Table 13 . Size of the annual budget in the respondents’ organizations . . . . . . 41             Table 14 . Areas of operation of the respondents  . . . . . . . . . . . . . . . . . . 41             Table 15 . Theories of creation and existence of the respondents  . . . . . . . . . 43             Table 16 . Overview of economic theories of nonprofit organization existence                      with confirmed dependency . . . . . . . . . . . . . . . . . . . . . . . . 44             Table 17 . Basic characteristics of commercial, social, and nonprofit entre-                      preneurship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46             Table 18 . Concepts of NPOs’ functions identified in literature . . . . . . . . . . 47             Table 19 . Development of the nonprofit sector in the Czech Republic from                      2009 to 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53             Table 20 . Development of the nonprofit sector in Slovakia from 2009 to 2012 .  . 54","148                         Nonprofit organizations in selected CEE countries ...                Table 21 . Comparison of registered and active NGOs in Slovakia in 2008–2012 .  . 55             Table 22 . Comparison of selected characteristics in Slovakia and Austria . . . . 58             Table 23 . Funding sources of nonprofit organizations . . . . . . . . . . . . . . . 60             Table 24 . Surveyed NGOs and representativeness in Slovakia  .  .  .  .  .  .  .  .  .  . 64             Table 25 . Sources of funding of NGOs in the Czech Republic, Slovakia,                      and Austria  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 65             Table 26 . Use of self-financing according to the age of NGOs in Slovakia . . . . 67             Table 27 . Problems connected with funding NGOs through self-financing . . . 70             Table 28 . Income of nonprofit organizations for 2008-2013 . . . . . . . . . . . . 80             Table 29 . Number of nonprofit organizations expressed in number of tax                      returns from business activity . . . . . . . . . . . . . . . . . . . . . . . 81             Table 30 . Business revenues of nonprofit organizations in thousands € . . . . . 82             Table 31 . Analysis of dependence of financial controlling utilization on cho-                      sen identifying criteria    .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 87             Table 32 . Significance of information obtained from financial controlling  . . . 89             Table 33 . Dependence of a person responsible for carrying out the financial                      controlling on selected identification criteria  . . . . . . . . . . . . . . 90             Table 34 . Friedman test for correspondence of barriers to implementing fi-                      nancial controlling in NGOs   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 95             Table 35 . Summary of economic entities and social enterprises by legal form  106             Table 36 . List of cases of co-creation at the local government level   .  .  .  .  .  . 113             Table 37 . The role of different actors in co-creation based initiatives in dif-                      ferent stages of the co-creation  . . . . . . . . . . . . . . . . . . . . . 114             Table 38 . Schematic display of co-creation effects (PrieStory program) . . . . 119             Table 39 . Evaluation of target outcomes per stakeholder per value (PrieStory                      program)   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 120             Table 40 . Evaluation of outcomes per stakeholder per value (Kojatice case)  . 123             Table 41 . Schematic display of co-creation outcomes (Kojatice case)  .  .  .  .  . 124",""];